Credit Card 101
A credit card is a card that allows you to borrow money (or credit) to pay for your purchases. You later have to repay the credit card company for what you borrowed, plus any interest built on that purchased amount.
Generally, you cannot build a credit history with a debit card.
When you use a debit card, you are accessing funds in your bank account. This is regardless of whether you use it at the ATM, at a store, online, or even via the telephone.
When you use a credit card, you are borrowing money from the credit card issuer. If you don't repay that full amount by the next billing cycle, you may be charged interest on these purchases.
A billing cycle is a period of time between billings. A billing cycle is recurring and usually on a monthly basis. A credit card company will summarize all the purchases you've made in that cycle and send you a bill for the total amount at the end of the cycle.
A minimum payment is the smallest amount you can pay on your credit card bill to avoid late fees and remain in good standing.
Imagine you received your credit card statement after a weekend road trip, and find out that you owe $400. If you make the $50 minimum payment by the due date, your payment will be considered on time and you would now only owe $350. Regardless, you will likely start owing interest on that amount, and will have to pay back, in addition to that $350, down the road.
If you pay less than the minimum, or make the payment after the due date, your payment will be late and you may be charged a late fee.
Your balance is the amount of money you owe to the credit card company. Each purchase adds to your credit card balance, along with any interest or fees. When you make a payment, your balance will decrease.
- For example, pretend you used your credit card to spend $200 on groceries and gas. You would then have a $200 credit card balance.
- If you decided to pay $80 back to the credit card company the following day, your new balance would be $120.
Interest is the cost of using someone else's money.
Let's say you borrow $200 dollars to buy a concert ticket to see your favorite artist, and this debt has a 10% monthly interest rate.
- The first month you will be charged twenty dollars (200 x 0.10). That twenty dollars is added to your original debt, so now you have $220 of debt.
- The second month you are again charged 10% interest, which now comes out to twenty–two dollars (220 x 0.10). Now you have $242 of debt.
- As you can see, this will add up quickly if you don't pay your debt off on time.
For credit cards, the interest rate is stated as an Annual Percentage Rate, or APR.
Your APR—or annual percentage rate—is a statement of the interest rate as a yearly rate.Let's say you started a new term and charged $500 for books, with an 18% APR. If you never made any payments over the 12 months, you would owe an extra $90 annually.
An annual fee is a fee that may be charged on a yearly basis for maintaining a credit card.
A credit bureau is a company that collects information about your credit history, and makes it available to lenders (including credit card companies), employers, landlords, banks and others.
Your credit line is the total amount you can spend on your card, whereas your available credit indicates the remaining amount of credit in your credit line, less the amount you already borrowed.
For example, imagine you have a $1000 credit line and just bought a $300 furniture set. Your available credit would then become $700. You can find out how much credit line you have on your statement, or in your account center at Discover.com. Or you can call us here
About Discover Student Credit Cards
Discover Student credit cards are meant to give you the opportunity to build your credit history, and earn cash back rewards on purchases.
A credit history helps inform your credit score. This credit score helps predict how likely you are to pay back the borrowed credit. Companies use credit scores to make decisions in offering a credit card, car loans, mortgages, or other credit products.
Cash back refers to earning back a percentage of the money you spend on your credit card. After you've earned these cash rewards, you will be able to use them by redeeming for things like bank deposits, statement credits, gift cards to popular retailers, and more.
Many cards offer 1% cash back or more on purchases. For example, say you spent $50 buying coffee for your study group, and your card gives you 1% cash back on this purchase. When you receive your credit card statement at the end of the month, this particular purchase would have given you .50 cash back to redeem.
There are 5 things you need when applying online:
- Be at least 18 years of age
- Have a U.S. Address
- Have a Social Security Number
- Provide all the required information requested in your Discover application
- Show proof of education
After Getting Your Discover Student Credit Card
While the concept of "building credit" may sound like a lot of hard work, it's a fairly simple process. These are ways to build your credit responsibly:
- Make all payments on-time
- Either pay your balance in full, or try to pay more than your minimum each month
- Avoid carrying a balance in order to avoid paying interest
Discover offers many easy ways to let you make a payment on your account:
While paying a bill can be daunting, Discover offers convenient email and text alerts to help you know when the following happens:
- Your statement is available.
- Your minimum payment is due.
- Your payment is posted.
- Your card is declined.
- A merchant refund is posted.
- Balance transfer is posted.
These alerts can also be cancelled at any time. Interested? You can sign up here
Feel like you are ready to take on more credit? You can apply by requesting an increase online, or you can call us at 1-800-DISCOVER.
When you graduate, call us to update your income and personal information such as your income, housing, e-mail and address. Updating this information may make you eligible for credit line increases.
Congratulations on graduating! While many things might be changing in your life, your Discover Student card doesn't have to. You'll still keep all the same rewards and benefits on your credit card.
However, when you graduate, please call us to update your income and personal information such as your income, housing, e-mail and address. This may make you eligible for credit line increases.