Studies have shown that people generally maintain a business relationship with their first card issuer for 15 years, which is why creditors want to get customers when they are young. The relationship lasts so long because the young consumer doesn't know how to find better deals.

Many people are suggesting that credit card companies are aggressively trying to get students hooked on credit by luring them with T-shirts and other freebies when they apply for cards. This guide is designed to give you the facts you need to be a wise consumer and the tools to use credit to your advantage.

A credit card is not an invitation to spend money you don't have, and you must beware of falling into a credit card trap. Say you run up $500 on a credit card that charges 15% interest and requires a 2 percent minimum payment (never more than $20) each month. If you never charge another item, but only make minimum payments, it will take 6 years and seven months to repay your debt. When all is said and done you will have paid nearly $300 in interest on the $500 purchase.

Credit card issuers will also penalize you if you pay late or go over your credit limit. Always pay on time, even if it is just the minimum. Late fees have skyrocketed and it's not uncommon to find up to a $30 charge applied for a payment that's only a day late and issuers may also jack up your interest rate without notifying you.

These days, credit extends beyond just the amount of money you owe. Many employers and colleges may review your credit reports to judge your character. A history of late payments, over-the-limit charges, or too much debt may not paint a pretty picture. We hope that this guide will help you avoid credit disasters and give you a better understanding of the credit process.

Advantages & Disadvantages Of Using Credit

Advantages:
- Able to buy needed items now.
- No need to carry cash.
- Creates a record of purchases.
- Easier than writing checks.

Disadvantages:
- Interest (cost of items escalate).
- May pay additional fees.
- Financial difficulties may arise if one loses track of how much has been spent each month.
- Increased impulse buying may occur.

Your Credit Responsibilities
- Borrow only what you can repay.
- Read and understand the credit card contract.
- Pay debts promptly.
- Notify creditor if you cannot meet payments.
- Avoid buying on impulse.
- Report lost or stolen credit cards promptly.
- Never give your card number over the phone unless you initiated the call or are certain of the caller's identity.

What do creditors look for when they are deciding who to give credit to? They look at the Three C's...

Character - do you intend on repaying your debts?
- Have you used credit before?
- Do you pay your bills on time?
- Do you have a good credit report?
- Can you provide character references?
- From your credit history, does it look like you possess the honesty and reliability to pay credit debts?
- How long have you lived at your present address?

Capital - what are your sources to repay the debt?
- What property do you own?
- Do you have a savings account?
- Do you have investments to use as collateral?

Capacity - can you repay the debt?
- Do you have a steady job?
- How long have you been at your present job?
- What is your salary?
- How many other loan payments do you have?
- What are your current living expenses? What are your current debts?
- How many dependents do you have?
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