Frequently Asked Questions

Credit Cards

A credit card allows you to borrow money from a credit card company, with the agreement you will pay a percentage of interest on any outstanding debt at the end of each billing cycle. A debit card pulls money directly from an associated bank account. Responsible credit card can help build your credit history. Generally, debit cards can’t do that.

Applying for a credit card is a simple, straightforward process that requires some basic information. Students will need the name and location of their school in addition to a social security number and primary address. For security purposes, you may need to know your mother’s maiden name.

There are plenty of options on the market for people with limited credit history. Shop around to find the card with the lowest APR and fees you can qualify for. If you are having trouble being approved for cards, consider a secured credit card that requires a security deposit or ask a parent to add you as an authorized user on his or her card.

There is no “right” number of credit accounts to build a solid credit history. There are many factors that make up a credit score (and every reporting agency has many formulas), but late or missed payments, frequency of credit inquiries, and your credit utilization ratio are all major factors. When you’re starting out with credit, it can be safer to begin with one or two cards to ensure you can make payments consistently before adding more.

A more advanced move is to optimize your credit utilization ratio, possibly by adding cards or requesting higher limits. Your utilization ratio is the amount of total debt you’re carrying compared to your total credit limits. If you can responsibly manage multiple lines of credit, you can lower your utilization ratio even if you may be carrying a balance on one or two cards.

Receiving a pre-approved credit card offer means that a credit card issuer has verified with a credit bureau that you meet its credit criteria and has pre-approved you as a quality candidate for its product. You’ll still need to apply in order to actually receive a new credit card, at which point you may still be accepted or denied.

18 is typically the minimum age to apply independently for a credit card in the United States. However, people under 18 can be added as authorized users to their parents’ accounts.

There are a few reasons your Annual Percentage Rate (APR) can go up even if you’re up to date on all payments. These include a decrease in your credit score, the end of a card-related promotion, a change in the prime rate if you have a variable-rate card, or if you have made late payments.

One simple rule: pay your bill in full and on time every month. Late fees can impact your pocketbook, and late or missed payments can also have a negative effect on your credit score.

Also pay attention to all mail received from your credit card company. While your card may not have had an annual fee when you signed up, you may receive communication that the terms and conditions have changed. You can choose to cancel the card to avoid the fee, but only if you know it’s coming. Deciding to cancel a credit card is a big decision and shouldn’t be made lightly.

Advantages to online shopping with a credit card over a debit card usually include more purchase protection along with additional warranties and rewards. Not all cards are created equal, but many of the top credit cards offer benefits such as purchase protection, extended warranties, return guarantees, and rewards programs.

The most significant difference has to do with fraud. If someone makes fraudulent charges with your debit card, the money comes directly out of your bank account. Even if you are able to get a refund, it can take weeks or months to get that money back. With a credit card, you can dispute the charges and the funds never leave your account.

It never hurts to call your credit card company and ask for a lower interest rate. Depending on your current standing and credit history, a customer service representative may be able to approve a lower rate. Also consider a balance transfer to a card with a low or zero percent introductory APR offer, but watch out for balance transfer fees if you choose to do this.

Cash back is when the credit card company gives you a certain percentage of what you put on the card back in the form of rewards. Different programs offer different redemption options. You may be able to use it as a credit toward your current statement, to shop online, to purchase gift cards, or simply have it deposited back into a connected bank account. Discover allows card members to donate their cash back to a wide selection of non-profit organizations as well.

A statement credit is a positive amount on your credit card bill. If you accidentally overpay, most credit cards will apply a statement credit toward your future purchases. As mentioned above, some rewards programs also allow you to apply cash back to a statement credit, lowering your balance by using your cash rewards.

Some programs have no expiration dates and you can earn and use rewards whenever it’s convenient for you. Others have annual programs with “use it or lose it” clauses requiring that you redeem rewards within a certain time period or else forfeit their value. Be sure to read your Credit Card Agreement to understand if and when rewards expire.