Understanding Credit Card Costs and Considerations for Students (Age-Appropriate)

1. Which of the four factors directly impact your total cost of using the credit card?

Interest rate (APR) and fees directly impact total cost; the balance you carry and how long you carry it also affect total interest paid.

2. Miles is planning to open a credit card, charge only his monthly streaming service subscriptions (less than $50 per month), and pay his entire bill in full each month so that he never has to pay interest. Which of these factors do you think is most important for Miles to consider when selecting a card? Why?

Most important: the card with no annual fee and a low or zero foreign transaction fee if he travels, because he will pay nothing in interest and wants to keep costs low while staying within his budget.

3. Delara is opening a credit card because her budget is really tight right now and she’s struggling to pay all of her expenses based on her income.

1. a. Why might a card with a long grace period be in her best interest?

Because she may need more time to pay without paying interest, giving her budget a bit more flexibility.

2. b. She knows she’ll be making only the minimum monthly payments each month until she can find a job where she’ll earn more income. This means some of her payment every month will go toward paying interest rather than paying down her principal. What other factor(s) might be most important to Delara? Why?

Her to-do items: choose a card with a low or zero annual fee and a low APR or a 0% intro APR period to reduce early interest, and look for a card with good customer support and a manageable minimum payment; these help her budget better while she improves her income.