Credit Cards: Read Your Fine Print
‘Changes to the terms of your Account may be based upon information in your credit report that changes your credit rating, competitive or market-related factors, and your performance with Bank of America.
‘We apply payments to low APR balances before higher APR balances, which means your finance charges will increase if you make transactions that are subject to higher APRs.
‘If at any time during any rolling consecutive twelve billing cycle period we do not not receive two minimum payments by your payment due date or you exceed your credit limit twice, we may elect to automatically increase any and all of your standard APRs to the Penalty APRs.’
Was that boring? I’m sure I just lost half my readers.
When applying for credit cards, this is the type of information that students skim over because it seems too tedious to read. Some students don’t even know to look for this information.
When I applied for a Bank of America credit card last week, I asked them to tell me more about their student card and the banker smiled sweetly and told me it was beneficial and most convenient to begin establishing a credit history as a student and ‘best of all, it’s free!’
Then she asked me for my social security number, drivers license, address, mother’s maiden name, school, school ID number, perhaps some other basic information and told me that my credit card was on its way to my mailbox.
And that’s really all that 44.7 percent of college students needed to go through in order to accumulate an average debt of $3,066.
Reread that fine print: ‘If at any time during any rolling consecutive twelve billing cycle period we do not not receive two minimum payments by your payment due date or you exceed your credit limit twice, we may elect to automatically increase any and all of your standard APRs to the Penalty APRs.’
Students do not read their disclosures in detail and are probably unaware of their current interest rate, even though this information is more important to their credit history than the bolded ‘0% APR!’ in the front of those credit card applications they receive in their mail.
Credit card companies are tricky. Your statement may include unexpected fees and changing rates, but they’re always legal because the fine print says so.
Some cardholders don’t realize that credit card companies particularly target college students because, among other reasons, college students don’t read the fine pring. Without knowing what the print says, college students are less intimidated to spend money they don’t have.
For example, if students that apply for 0 percent APR credit cards miss so much as one payment, the interest rate increases to one that is much higher than the average credit card interest.
Interest rates can also increase as a penalty for other slip-ups, but the bad part is that when a student’s interest on one card increases, he or she may start heaping interest on other credit cards as well.
Credit card companies retain the right to raise other rates, shorten grace periods and change terms at any time.
Conditions like these are not explained at the time of application. Because they are explained in fine print, they are often disregarded and cardholders’ rates seemingly increase without cause.
According to the the U.S. Public Interest Research Group, college students who obtain credit cards on campus are in higher debt than those who don’t. Around 80 percent of college undergraduates have at least one credit card, and I’m wondering if some college students even see the interest charges deducted from their accounts. Of that 80 percent, 10 percent have an unpaid balance of at least $7000.
At the rate of 18 percent interest (my Bank of America credit card’s APR is 18.74 percent), an $8,000 debt may take over 25 years to pay off and may ultimately cost well over $24,000.
Of course, credit cards can be beneficial, if the user is aware of why they are swiping.
Responsible cardholders swipe to establish a good credit history to purchase a house or car in the future, as an alternative to carrying around large amounts of cash, or to make safer transactions online.
My advice to you, college student, is to be prudent about swiping your plastic. Don’t spend money you don’t have, and always be sure to read your fine print.