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48 | WINTER 2019 Creating a solid financial future College students should ask questions before applying for a credit card By Chris 'O Shea C ollege kids have a lot to think about, and one of the things weighing on their minds is finances. For a lot of them, college is the first time they'll be (mostly) financially independent. That freedom could inevitably lead to opening credit card accounts. And while that's fine if they're ready, some would be helped by doing research first. Here are some questions all college kids should ask before applying for a card. What will I be charged for using this card? While fees vary among cards, there are a few charges you should know: • Annual fee — the yearly charge for using the card • APR — the interest rate on the card • Balance-transfer fee — fee for transfer- ring the balance of one card to another (typically 3 percent) • Cash transaction fee — 3 to 5 percent transaction charge on cash advances What happens if I don't pay the card off each month? Be aware: When you're saving money, compound interest is your friend. When you're spending it on a credit card, it's your enemy. If you pay off your balance in full each month, you'll be golden. If you don't, you'll start feeling the impact of compound interest right away. As US News reports, if you pay $100 on a $500 balance, you're paying interest on that $400 balance. That means when the next payment is due, you'll need to pay a percentage of the $400 balance and the interest on that balance. Do I need to worry about my credit utilization ratio? Yes. Credit utilization ratio is your credit card balance in relation to your credit limit. You want that number to be as low as possible. The credit ratio is watched closely by credit bureaus, and it has a big impact on your credit score. You never want to use more than 30 percent of your credit limit in a billing month. CHRIS O'SHEA is a regular contributor to SavvyMoney. To get your own financial checkup with SavvyMoney today, visit SavvyMoney.com/AACU.