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Student Banking

Banking Basics: Choosing a Credit Card

Review this 3-step guide to finding the right card for you

Always shop for the right card—the company that sends you a great student credit card offer isn’t necessarily your best option.

When you decide the time is right to get a credit card, there are some things you should consider before you apply. Here's a 3-step guide to help you find the right card:

  1. Define your needs—and recognize your limits

    Ask yourself some key questions: How, when and where will I use my card? Will I be able to pay off the balance every month? What are the most important credit card features I need?

    If you are using this as an opportunity to build your credit rating and plan to pay off the balance every month, you might focus on rewards and discounts because interest rates won't be as much of a factor. If you know that you will likely carry a balance on the card, then searching for the best APR could save you money in the long run.

    Be sure to consider what your appropriate credit limit, including any fees or interest charges, might be. If you've already defined how much credit you want or need, you may be less tempted to apply for more credit than you need just because the lender offers it to you. Your limit should be high enough to meet your needs, but low enough to keep you out of trouble.

  2. Compare features

    Here's a list of features you should consider when comparing credit card offers:

    • Student credit cards. Does the company offer a card designed with students in mind? Many student cards have special APRs and fairly low credit limits that will help you build a strong credit history.
    • Maintenance fees. Some credit cards require you to pay monthly or annual maintenance fees. Many banks offer credit cards without maintenance fees, but you may have to give up other features.
    • Annual percentage rate. The APR tells you how much credit will cost you on a yearly basis. Many cards offer an introductory or promotional rate that increases after several months, so be aware: That low rate may increase significantly after a while. Some cards will increase your APR if you miss or are late with a payment. Some cards have variable APRs that fluctuate based on an index such as the U.S. Prime Rate.
    • Grace period. If you charge something today, does the card issuer start charging you interest on that purchase today or after a grace period of a certain number of days? Some credit card issuers give you a grace period only when the account is paid in full and consists entirely of purchases.
    • Fees and penalties. How much will you pay in late fees or fees for balance transfers and cash advances?
    • Rewards and discounts. Does the card offer special incentives like the opportunity to build up frequent flyer miles or earn rewards that can be redeemed for merchandise or cash back? Do cardholders get discounts that would pay off for you?
    • Special offers. Is the lender offering any special rates or bonus rewards for opening the account? Can you take advantage of any special offers just for students?
    • Acceptance. Can you use the card anywhere? You can find the best credit card deal in the world, but if you can’t use it when and where you want, all the other features won’t matter.
  3. Read the fine print

    Before you submit your credit card application, make sure that you've read all the terms and conditions closely. If you don't take the time to read them now, you may get hit with unexpected fees or APR increases later.

Prime rate

The interest rate that banks charge their best customers when lending them money. The U.S. Prime Rate, as published daily by The Wall Street Journal, is based on a survey of the prime rates of the 10 largest banks in the United States. The U.S. Prime Rate is used by some financial institutions to calculate variable interest rates for credit cards. Changes in the U.S. Prime Rate influence changes in other rates, including mortgage interest rates.

Maintenance fees

A charge made by a financial institution for keeping an account, a charge made to a deposit account if the minimum balance is not met or a recurring charge applied to deposit products to pay for their maintenance.

Annual percentage rate (APR)

The annual percentage rate (APR) is the cost of credit expressed as a yearly rate. The APR is a measure of the total cost of credit, including interest, loan discount, origination fees, transaction charges, and premiums for credit-guarantee insurance; it is not an interest rate. The APR relates the amount and timing of value received by the borrower to the amount and timing of payments made by the borrower. The APR is designed to take into account all relevant factors and to provide a uniform measure for comparing the costs of similar credit transactions.

Credit rating

A numeric expression of creditworthiness based upon an individual's present financial condition and past credit history.

Credit cards for students

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