Credit Card and Cell Phone Tips for College Students
Before you sign... Read the fine print During freshman orientation, Ben noticed a table advertising free T-shirts. All he had to do to get a shirt was apply for a credit card with a $250 limit. He signed the paperwork, figuring it was a good deal: he got a free Tshirt and a credit card he could use for emergencies. Two years later, he had an emergency. Benâ€™s intramural broomball team had just pulled off a stunning, come-from-behind championship victory, and he needed to throw a party â€” immediately. So he used his credit card to withdraw $250 in cash to buy food and drinks for all his teammates and friends. A month later, Ben noticed his credit card bill was almost $100 more than he expected. His cash advance had cost him $7.50 plus interest, which pushed him over his $250 limit. Then he was assessed a $37 over-limit fee and an additional $37 fee for being one day late on his previous bill. Since Ben could only afford to make the minimum payment on his credit card bills, his balance and interest continued to increase each month. By the time he graduated, Ben owed more than $5,000 in credit card debt. He was sued for debt collection, which meant he had to pay
attorney fees for both himself and the credit card company. Because of his low credit score, he was denied a job, a car and an apartment. He couldn’t even buy a computer. Looking back, he determined that his “free” T-shirt wasn’t really free at all.
The truth about credit cards Credit card providers lend money in exchange for charging interest and fees. Unlike other forms of payment, credit cards allow you to ‘revolve’ your credit, which means you can carry a balance and avoid paying in full each month. Credit cards help college students establish good credit, but they also make it easy for them to make expensive purchases they cannot afford. When students do not pay off their bills, they can end up owing hundreds or thousands of dollars in interest alone.
What to look for in the fine print Credit providers can change the terms of your contract at any time without notifying you, so it is important to read all the fine print. Annual Percentage Rate (APR): Your APR is how much it costs each year to borrow from your credit provider. Keep in mind that an offer for “0% APR” only lasts for an introductory period, after which your APR will increase. Credit providers can raise your APR for almost any reason.
Grace period: This tells you how much time you have to pay your bill without interest. The average grace period is 20-25 days. However, not all charges have a grace period. A cash advance charge, for example, may accumulate interest immediately. Payment allocation: Many credit card companies automatically apply your payments to low APR balances instead of high APR balances. You have to pay more interest on high APR balances, so make sure you pay them first. Cash advances: You can use your credit card to withdraw cash, but most credit card companies charge extra for cash advances. If you need cash, use your debit card instead. You also may be charged extra for foreign transactions and balance transfers. Additional fees: Credit card providers can charge you late fees if they receive your payment just one minute late. Over-limit fees apply when you spend more than your credit limit. Some cards also charge an annual fee to cardholders. Universal default: This policy allows a provider to raise your rate if you are late on any other debt, such as a cell phone payment, car payment or a different credit card. Credit score (a.k.a. FICO score): Your credit score identifies how â€œcredit-worthyâ€? you are. Late payments and missed payments lower your score. A bad credit score can stick with you for years, and it can cause you to be turned down for a job, an apartment, a mortgage loan or even insurance.
Credit Card Tips • Don’t take every credit card offer you receive. • Shred credit card applications you get in the mail so no one else can apply in your name. • Always pay your balance in full. • Only charge what you can pay each month. • Save all receipts. • Carefully monitor your bill and report disputed charges immediately. • Don’t give your credit card number to anyone. • Make photocopies of your cards • Check your credit report for free at www.annualcreditreport.com. • Know your credit score and learn how to improve it.
How much is that text message really costing you? When Amy sent 1,000 extra text messages in May, her bill skyrocketed from $50 to $250. After paying the painfully high, $200 penalty fee, she decided to buy unlimited text messaging for her phone. A few months later, a new high-tech phone came out. Amy really wanted one, but her service provider did not offer it. Since her current contract was ending, she decided to switch providers to get the new phone. After she switched, however, she received a $200 early termination fee from her previous provider. Apparently, the text message upgrade she bought in June had extended her contract by two years. Amy had no idea that something as simple as text messaging could cost her so much. Like Amy, you may not realize that getting a new phone or improved plan may automatically extend your cell phone contract. To avoid paying penalties, always read the fine print. It could save you hundreds of dollars.
What to look for in the fine print The monthly total of all charges: Advertised prices usually do not include costs such as taxes, new phone activation fees, or state and local fees. Limited-time offers: A promotional deal may last only for a limited time, after which you will be charged more for using the services. Return policy: Choose a plan that gives you a few weeks to cancel your contract and return your phone if it does not work. Otherwise, you will have to pay cancellation fees.
Early termination fees: Almost all providers charge you about $200 per phone number for ending your contract early. Roaming/long-distance charges: You may be charged for roaming even when you are in your home calling area. Daytime, nighttime & weekend minutes: Cell phone providers define calling periods differently. Know exactly when your daytime, nighttime and weekend minutes begin and end. Upgrades that extend your contract: If you change your plan or get a new phone, your contract may automatically extend one or two years. The provider’s right to terminate your service: Most cell phone companies reserve the right to cancel your service for any misuse, such as paying late or harassing their employees.
Cell Phone Tips • Compare at least three different services before choosing a plan. • Talk to friends and family to determine which service will work best in your area. • Get all promises in writing. Otherwise, they are not guaranteed. • Don’t sign a contract until you have read all the fine print. • If your phone is lost or stolen, notify your service provider immediately. Otherwise, you will be charged for any unauthorized use.
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