FINANCE

This means that if you plan on carrying a balance on your card, charging more on credit than you can pay off each month, and you don't have perfect credit history, then you are at risk for having to pay higher interest rates than your nieghbors. And carrying high, unpaid balances on your credit card is one of the quickest ways to bankruptcy. APR is the total interest and fees, expressed as a percentage of your current balance, that you will be charged on any balance that remains on your credit card at the end of every month. The better your credit score, the better you chance for being offered a lower APR card.

Why do Credit Card Companies Target Low Income Populations, Including Students?

Surprisingly, many low income wage earners, including students, are a good credit risk, despite the fact that they often do not have much wage earning power. Research has shown that low income borrowers are valuable customers because they tend to stay loyal to their first card, continuing to make purchases for many years to come. There is a sense of loyalty and honor to owning the credit card, a feeling most middle and high income wage earners don't understand and take for granted.

The Advantages of Credit Cards

Like loans, using credit cards can help you build a positive credit history. This can enhance your ability to receive a private student loan, buy a car, rent an apartment, get a job, and eventually, try to buy a house. Of course, there are other advantages to having a credit card including:

• Security in emergencies
• Reduced need to carry cash or checks
• Enhanced personal responsibility and independence

However, only one national card like a VISA, MasterCard, or American Express is necessary to receive these benefits.

How Credit Cards are Billed

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 when signing up for the card).

The minimum payment is usually 2 percent of your outstanding balance. Unfortunately, by paying only the minimum each month instead of paying off your entire balance, your debt will continue to grow. Many credit card companies also charge late fees (usually 2 percent of the outstanding balance), and higher interest rates on cash advances.

So, Are You Ready for a Credit Card?

You will have to decide for yourself if 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. According to the PIRG study, of the 79 percent of surveyed students who use credit cards for multiple purposes, only 13 percent reported limiting credit card use to emergencies.