5 Tips College Students Need to Know About Credit Card Interest

In many cases, an individual’s struggle with debt begins in college. Credit card companies often place credit card offers in strategic college locations and mail college students credit card offers. Students jump at the opportunity to get a credit card for various reasons. Some want access to extra spending money. Others need to pay for textbooks and other items, and still others want to work on building a great credit rating. Before you sign up for a new credit card, it is important that you understand how credit card interest works.

Interest Rates Can Change
Many people who are new to credit cards fail to realize that interest rates are not locked in. Many credit card companies offer a low introductory rate, and this can entice you to open a new account. At the end of the initial term, however, the rate can jump. This will cause your monthly debt payment to jump as well.

Interest May Not Accrue Immediately on New Purchases
If you are using credit cards to make frequent purchases, you may be pleased to learn that interest may not always accrue on new purchases immediately. Some credit card companies have a grace period of a few weeks. If you pay your balance off in full before interest accrues, you can avoid paying interest charges.

Debt Is Established on a Revolving Term
Credit card debt has a revolving term. This is unlike a fixed term, with which the debt will be entirely repaid at the end of the fixed loan period. Revolving debt can take long years or even decades to pay off because of the revolving term status.

Better Interest Rate Offers May Be Available
When comparing credit card offers, pay attention to the initial introductory rate as well as what the rate will adjust to after this period expires. Better rates may be available with other offers. Therefore, compare both the starting and adjusted rates when making a decision. It can also be wise to look at the highest possible rate on the debt. If you fail to make even a single payment on time, some creditors will bump your rate up to the highest possible level.

Interest Can Make Debt Balances Challenging to Pay Off
The interest charges on credit card debt can make this debt difficult to pay off. In some cases, you may find that your interest charges are a few hundred dollars per month. With each payment, a large portion of your payment is applied to interest rather than to debt reduction.

Credit cards can be beneficial when properly used. However, it is best to research the offers carefully to find the best deal available. In addition, you should take every effort to pay balances off in full each month to avoid falling deep into debt.