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Monday, January 16, 2012

5 Credit Card Facts Students Won't Learn in College

As the first semester of 2012 starts, college students will receive an abundance of credit card offers, while credit education is often left out. Here is a tip sheet of 5 not so well known facts about credit cards, courtesy of

Los Angeles, CA January 16, 2012

As college students return back to school, credit card companies will be waiting for them. Unfortunately, too often is the case where credit education falls by the waist-side. has put together a tip sheet with 5 little known facts about the credit card.

1. The first ever credit card was the Diners Club card, first issued in 1950 for people to use in a select group of New York City restaurants. Although individual businesses, such as oil companies, hotel chains, and department stores had issued charge cards before, this was the first example of a card that individuals could use to pay their bills at multiple businesses. The idea caught on, and within a year, over 20,000 people had the Diners Club credit card. By 1958, both American Express and BankAmericards entered the market, and the rest is history. Today, the BankAmericard, now renamed Visa, is the most common type of card, followed by MasterCard, American Express, and then Discover.

2. Applying for multiple credit cards in a short period of time can lower your credit score. Every time you apply for a credit card, the issuer checks your credit score. This is called a credit inquiry, and it is noted on your credit report. Each inquiry lowers your credit score by up to about five points, and having many of them at the same time can result in an even larger impact. This is because it looks like you are desperate for credit, which indicates that you are not financially stable and might not be able to repay your debt. Statistics show that if you have made six or more credit inquiries in the past two years, you are eight times more likely to declare bankruptcy than someone who has made no inquiries.

3. Your credit score does not only affect whether you get approved for a credit card or loan, but it also affects your interest rate. Lenders give the lowest interest rates to people with the best credit scores because they are less likely to default on the loan. If you have a low credit score, you will have to pay more in interest because the lender is taking a big risk lending to you, and you have a greater chance of costing the lender by not repaying your debt. Therefore, having a bad credit score can cost you thousands of dollars extra in interest, especially on big loans like mortgages. With a 30-year mortgage for $200,000, you will pay $22,296.51 more in interest if you have an interest rate of 5.5 percent than you will with an interest rate of 5 percent.

4. The Credit CARD Act of 2009 helped consumers by making credit card bills much easier to read and understand. Now, all bills must clearly show the minimum payment and tell you how long it will take to pay off your balance if you make no new charges and pay only the minimum. In addition, the bill must state the monthly payment you would need to make to pay off your balance in three years and compare the total interest between the payment plans.

5. You can use your credit card without ever paying interest, as long as you pay off your credit card balance in full every month. This can result in an interest-free loan for up to 50 days. For example, say your billing cycle ends on the 1st of each month and your bill is due on the 22nd of each month. If you make a purchase of $2,000 on March 2 and pay off in full the bill from the previous month that is due on March 22, you will not have to pay the $2,000 until April 22, and you will not owe a penny of interest on it. You only have to pay interest when you start carrying a balance from month to month.