Watch out—it’s a credit card application!

Up late studying for a midterm exam? Writing a final paper? Looking for a way to procrastinate?

Oh, look! Today’s junk mail! Pre-approved offers for credit! This is the perfect opportunity to avoid schoolwork. Let’s fill one out!

Yes. This is great. It’s easy and mindless and in the end you get thousands of dollars. Credit. You’re probably thinking the same thing I am—this sure seems a lot more rewarding than the measly 5 credits you’d get for passing the course!

Before filling out the application, though, let’s look it over and read the fine print. I know. I don’t like it either, but—what?—you would rather be studying?

I didn’t think so.

Let’s start with APR. It stands for Annual Percentage Rate, and every credit card company is required, by law, to show it to you. This is because companies could easily deceive you by listing a low monthly rate of, say, 1%. In reality, 1% monthly is a 12% APR.

So, say the APR being offered really is 12%. What does this mean? Simply, if you keep up an average balance of $1000 for a year, then you’ll end up being charged 12% of that ($120). Of course, that’s assuming the APR doesn’t change.

And that’s the thing. Credit card companies are always switching up the APR. But if you’re smart, you can avoid this. Check to see whether it’s “fixed” or “variable.” Credit cards often offer low upfront APR’s to reel you in, but then jack up the rates after a pre-specified date.

Now, if you really want to see a big APR, try making a late payment or two. That’s what I call big (think 25% APR).

Also, your APR will depend on how the card is used. If you buy things with it, you’ll be charged a certain rate for that balance while the cash advances you take out (ATM’s or checks) are subject to a whole different rate. Be careful about using the card for both; your payments will be applied to the balance with the lowest APR, leaving the high APR balance stuck out in the cold, accruing high interest.

That’s why it’s a good idea to think about what you’ll actually be using the card for—before filling out the application. Consider limiting it to one kind of transaction: purchases or cash advances.

Now that you’ve learned about APR, it’s time to move on to annual fees. Some companies charge you a flat rate, like $50 a year, just for the privilege of using their card. To me, that seems a bit ridiculous. But, if it turns out that the APR is sufficiently lower than the card with no annual fee, then it might actually cost you less.

Okay, I know you really want to get back to that term paper, but before doing so let’s look over a few other important terms:

Finance charge – any fee placed upon your balance (like APR).

Grace period – the amount of time in which you can pay back a balance in full without accruing finance charges.

Minimum finance charge – usually less than a dollar. The lowest possible amount charged if a finance charge is placed on a balance.

Variable rate information – the way they can change up the APR for purchases.

Late payment fee – fixed penalty amount charged for a late payment (usually in addition to an increased APR).

There are also fees charged for cash advances, balance transfers and going over the credit limit. Be sure you know what these are before applying for your card.

Make sure to take things things into account before applying for a student credit card when in college. No one want so be 30 and still paying off credit card debt from college.