Hey, newly minted student. As you adjust to a new neighborhood, town, or country, you have some important considerations. Perhaps the most important is personal finance. Though answers to money-related questions might vary on one’s situation, there is basic knowledge every student should know. Today, the lesson is on credit cards: What is a credit score and is that different from credit report? Is it worth getting a credit card when I already have a debit card? What do all the credit card terms mean? Don’t worry if you don’t have answers right off the bat. Here are 3 things you should know before getting a credit card.

Understand credit scores and plan to achieve Excellent score

What is a credit score and is that different from credit report?

Credit score is the crucial determinant for credit card companies to open a relationship with you. It is a rating from 300 to 850 that reflects your likelihood of repaying debts. The higher the score, the better. Building and maintaining a good credit score is crucial for your finance profile because it affects your ability to get a loan, job, credit card, and so much more. Many students, particularly those new to the U.S., do not yet have credit scores. Some students might even consider sticking to a debit card in fear of building a bad credit. However, using credit cards wisely is the easiest step in building credit while enjoying perks credit card companies offer. Some wise credit card usage habits are choosing the right credit card for your situation, not over spending, and paying the bills on time.

There are different ways you can check your credit score. But before you do, make sure to know the difference between a credit score and a credit report. By knowing the difference between a credit score and a credit report, you can better navigate myriad of websites that offer you credit score services.

A credit report is a log of all your debts. It keeps a record of all the types of debt you’ve accumulated, how long you’ve had each debt, and your tendency to repay those debts. Every time you apply for a loan or a credit card, it gets recorded there.

The most widely used method of checking the credit score are through the Fair Isaac Corporation (FICO) or through the three main credit bureaus (Equifax, Experian, and TransUnion). A number of credit card companies offer free credit score checks, including Annual Credit Report.com, which offers 100% free reporting once a year. The recommended frequency for checking your credit score is once or twice a year.

Master the credit card language

There are different terminologies in the credit card world and knowing them can provide you a leg up in choosing the right credit card.

Credit line--the maximum amount of available credit that you have on a specific credit card

Balance--a credit card balance is the amount of money owed to the credit card company.

Available credit--this is the difference between your credit line and your balance

Minimum payment--this is the lowest amount of a credit card bill that a consumer can pay to remain in good standing with the credit card company.

Making the monthly minimum payment on time is the least a consumer needs to do to avoid late fees and to have a good repayment history on their credit report. The amount of the minimum monthly payment is calculated as a small percentage of the consumer's total credit balance. While YourCampusGuru recommends paying your entire bill every month, it is important to always meet the minimum payment.

Incentives/Rewards

Travel is just one of the many incentives that credit card issuers may offer.

Credit card issuers offer a number of different types of rewards and incentives for signing up and continuing to use their cards.

Sign-up rewards: sign-up rewards are offers that credit card issuers provide when you begin a credit card relationship. Many sign-up rewards require a minimum amount of spend over a number of months.

On-going rewards: a number of credit cards come with continual rewards for spending. Different cards come with different on-going incentives--some provide increased points or cash back based on spending in different categories.

Fees

Credit card issuers may charge a number of different fees--it’s important to know how much that credit card may end up costing you! Always read the terms and conditions of credit card fees to avoid unwanted surprises. There can be a number of additional fees not outlined below.

Annual fee--a number of cards come with an annual fee.

Some cards will waive the first year fee as a signup incentive. A number of other cards come with no annual fees [Link here]! Typically, higher annual fees come with more on-going rewards, but are definitely not right for everyone.

Interest fee--if you carry a balance on your credit card beyond your statement due date, you will incur an interest fee.

These fees can add up quickly, and are based on your card’s APR (see below). Even if you make sure to pay your minimum monthly payment, interest fees will accrue on your unpaid credit card balances.

Late payment fee--many card issuers will charge a fee if your payment is late.

These fees are in addition to interest fees that will accrue on your balance, and can be avoided if you meet your minimum monthly payment.

Annual Percentage Rate (APR)--the annual percentage rate is a representation of your interest rate (e.g., 2%/month is an annualized 24% interest rate).

Make sure you pay attention to different APR rates for different categories.

Choose the right credit card for YOU

You need to be approved by a credit card issuer when opening a new card. This can be particularly difficult for those with a limited credit history (particularly younger credit card users) and those who are currently unemployed. Understanding your current financial profile and the credit card you want helps you be in charge of the process. Different cards have different qualifications and benefits that satiate their target demographics. Even the same credit card issuer can offer numerous different cards: many issuers have cards specifically targeting students and other limited-credit-history consumers while also offering options for those who earn a steady income and enjoy traveling and dining. Don’t worry if you don’t know the right cards for increased chance of approval, we’ve selected some best cards for poor/limited credit scores or students in this article.

The theme in choosing a credit card is understanding the responsibilities and benefits of the card and deciding whether your financial situation can handle the responsibilities. It’s critical to know your situation when weighing your card options. As a student who does not travel or go out to restaurants often, getting a CapitalOne Venture card or Chase Sapphire Reserve is not a wise choice that will impact your credit score. YourCampusGuru has picked an aspiring credit card worth building your financial profile and credit cards that are the best for your current situation. Note that this is not a definitive list.

To know more about each card, please select the link next to the name: Chase Sapphire Reserve ® Link Here, SelfScore Achieve for International Students Link Here, Discover it ® for Students Link Here (Discover student credit cards here), Capital One ® Journey ® Student Rewards Link Here.

The Chase Sapphire Reserve ® is the credit card gold standard for those who enjoy frequent travels, luxury restaurants, and overall grandiose lifestyle. It might not be the one for you now, but it’s a card for your future self. As an international student, the best option would be the SelfScore Achieve for International Students. Not only students on F1, J1, or M1 visa qualify for the card, those without Social Security Number do as well. The Discover it ® for Students and Capital One ® Journey ® Students Rewards are good cards for those starting to build your financial profile. Enjoy the full benefits of the cards by heeding the wise credit card usage habits.

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