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Credit cards can be used during emergency situations. The card, itself, is convenient and a safer option for online purchases. Credit cards can be safer than carrying cash and may include additional benefits such as "cash back" and "buy now, pay later" options.ÌýIn addition, potential landlords, car loan lenders, and employers in fields such as banking and government will all review your credit and payment histories. A good payment history demonstrates responsibility—a trait most employers seek.

The biggest risk of using a credit card is also its greatest benefit: convenience. It's very easy to make an impulse purchase, and this can lead to negative credit card habits. Many credit cards can raise interest rates up to 29.99% in just a few months. In addition,Ìýthere are many fees associated with credit cards. Late fees average $29. Annual fees range from $25 to $60. If you exceed your credit limit, it can cost you as much as $25 extra per purchase over the limit. There are also cash advance fees, and transferring your balance can include a fee. Being late on one payment can increase your interest rate immediately.

Suppose you charged $100 each week for one year and made only the 3% minimum monthly payment. Because interest is also accumulating on your card's outstanding balance, your year-end balance would be $4,713. This is the total after deducting the $960 in payments you made throughout the year. By the end of the year, your reasonable payments will have grown to $146. Even if you cut up your credit card after that one year, it would take you 19 years to pay off that one year's worth of purchases, and you would end up paying $4,845 just in accumulated interest.

As a student, you will have to decide for yourself whether you can handle the responsibility of a credit card. They are easy to get but not so easy to manage, especially if you end up with a high, unpaid balance on which interest is accruing, but payments are not being made.

When making your decision about a credit card, ask yourself:

• Do I need a credit card?
• Can I afford a credit card?
• Will I be able to pay off my balance each month?

If you decide to apply for a credit card, be a smart consumer and shop around.ÌýÌýfor guidance on evaluating credit card offers. Look for a company that offers the following:

• A low fixed-interest rate, finance charges, or Annual Percentage Rate (APR)
• No annual fees
• A grace period (time during which no payments are due) before finance charges are posted
• Other benefits, including purchase warranties, free gas, airline miles, etc.
  

Repayment

Unlike repayment on a traditional loan, such as a student or car loan, credit cards do not allow you to spread the amount you owe over a fixed period of time. Instead, you are required to make a minimum monthly payment, which is the smallest amount you can pay and still meet your cardholder agreement (the terms you agree to meet when signing up for the card). The minimum payment is usually 2–3% of your outstanding balance. As your credit balance increases or decreases, so does the minimum amount you are required to pay monthly.

Sample Credit Card Repayment

Cash Advances

Use your bank debit card if you need cash, not your credit card. The interest rate on your credit card is usually 2–3% higher for cash advances than for purchases. Cash advances don't get paid in full possibly until the balance of the credit card is paid off.

Terminology

• Annual Percentage Rate (APR): APR is like a price tag on the borrowed money—it represents the rate of interest charged on credit card purchases, plus fees, expressed as a yearly rate.ÌýFederal law (under the Truth in Lending Act) requires credit card issuers to disclose their APRs as a way for consumers to compare the terms of different credit cards by using this common index.
• Interest Rate:ÌýThis is the charge attributed to receiving and using the loan amount, shown as a percentage of the loan amount. For example, if I borrow $100 at an interest rate of 10%, I'll pay $10 additional for the privilege of using the borrowed $100. (Note:ÌýWhen you make a payment, the money is applied first to fees, then to interest, and last to the principal.)
• Fixed or Variable: Fixed rates don't change throughout the life of the loan. Variable rates, by contrast, have an adjustment period and can change annually, monthly, or quarterly. The longer the adjustment period, the less frequently the rate will change, which is more beneficial for you, the borrower.
• Grace Period: The grace period is the number of days you have before you'll be charged interest on your purchase amount, usually between 20 days and one month. It encourages you to pay off your balance within one billing period. The longer the grace period, the better off the borrower is.

A credit report is a history of your ability to manage credit. Think of it as like a transcript of your credit management skills: It summarizes your past failures and accomplishments, and it gives you an overall credit grade, known as a credit score. Lenders report your payment history, amount borrowed, credit limits, and delinquencies to credit reporting agencies every 30 days.

Your credit report has a summary of key information that pertains to you: your personal information, name, date of birth, and Social Security Number. It also includes your credit history from banks, retail stores, and finance and mortgage companies. It includes public records, tax liens and bankruptcies, and court judgments. It lists other authorized parties who have received your credit report. (Note:ÌýYour report does not mention your race, ethnicity, gender, religion, country of origin, checking or savings account information, medical history, major purchases paid in full with cash or check, or business accounts, unless you are personally liable for your business's debt.)

You are entitled to one free report each year from Equifax, TransUnion, and Experian. You can decide whether receiving one credit report every four months, or all three at once, suits your needs better.Ìý, or call 877-322-8228.

Think of a credit score as a test score: the higher the score, the better the grade. The more negative marks on your credit report, the more points taken off of your score.

Once a creditor has a score, they assign a letter grade. This letter grade translates directly into the rate and term you'll receive in any loan you apply for. A and B grades produce loans that are good for borrowers. Most top banks lend only to A- and B-grade people. Those with less-than-perfect credit are lumped into the subprime category. Just like bad high school grades limit your choice of colleges, bad credit grades and scores limit your choice of banks and lenders.

The two biggest determinant factors are payment history (35%) and amount owed (30%). Other factors include length of credit history (15%), new credit (10%), and type of credit used (10%). Generally, a longer credit history will increase your score. New credit is based on how many new accounts you've established, how long it's been since you opened them, and how many requests for credit you have made. The type of credit used is based on the overall mix of credit cards, installment loans, mortgage loans, etc. that you have. The more balanced the mix, the more likely this factor is to improve your score.

If you are currently in debt, have trouble paying your bills, or have accounts being turned over to debt collection agencies, there are steps you can take to improve your credit report and help rebuild your credit score. The following tips were derived from .

Remember that there are no quick fixes for damaged credit; only time, effort, and planning can remedy past mistakes. Be wary of companies claiming they can fix accurate negative information on your credit report for a small fee—it is impossible for them to do this.

Review Your Credit Report

The first step to rebuilding your credit is reviewing your credit report. Once you have reviewed your credit report, you can begin to assess the accurate negative information and start to formulate a plan to improve your credit and decrease your debt. You should also be checking your report for inaccuracies and accounts that you believe are not yours, which you can dispute with the credit reporting agency.Ìý

Budget

Propose a realistic budget. Contact creditors as soon as you are having trouble paying your bills, explain your situation, and try to work out a modified payment plan to reduce your payments to a level that is more manageable for you.

Credit Counseling

If you feel that you cannot work out a budget, manage your bills, and work out a repayment plan on your own, you have the option of contacting a credit counseling service for help. Try to meet with a credit counselor in person if possible, and make sure to thoroughly research an agency before contacting them for credit counseling services.

Bankruptcy

Personal bankruptcy is considered the debt management option of last resort because its effects on your credit are far-reaching and long lasting. The consequences of filing for bankruptcy are significant, and the decision to do so should only be made after careful consideration of the pros and cons of such an action. For more information, you canÌý.