Common Student Misconceptions

Student mistakes are often duplicated. In this section, we hope to convey to you some common "misperceptions" so that you can avoid making the same mistakes.

Here they are:

"25 day grace period" - 
Most people in general believe that there is always 25 days of grace before you are charged interest. This is the case only when you have ZERO balance. When you do have a balance, interest is immediately accrued from the moment you charge something to your credit card.

"I'm establishing credit because I have a credit card with my name on it" -
Many students carry their parent's card with their name on it. In one way, it's great because they will pay the bill, but this does not build credit. To build credit, you have to apply on your own. It's well worth the effort to start building your credit history while you are in school. You'll save big when you borrow for your car. Also, you can carry your card when you road trip, rather than your parents' card so that you won't leave a paper trail of bills that detail your post Spring Break excursions.

"Banks only want to sign me up to make money on interest" -
That is only half true. What students don't realize is that every time you use the card, Visa/MC gets about 3% of the transaction. For example, if you charge $100 at a restaurant, the owner only gets $97! This money gets split up between the "processor" and the "issuer". This money really adds up. Just think, when you charge $1,000 a year you are generating $30 of revenue. In short, even if you don't pay a nickel of interest, banks are still making money!

"Just having a credit card builds good credit" -
No, having a credit card and making small transactions per month AND paying it all off builds credit. You don't have to owe money or keep a balance. Plus, you can pay off the entire balance and use the grace period.

Now let's see how a loan officer looks at you...