Students new to the wonderful world of credit cards can often become confused with the terminology, finance charge calculations, and/or balance computations. Resist the temptation to burst into the dorm room of your favorite math major, call your parents hysterically, or become a regular on the help hotline.

Once you learn the terminology and understand the basics of how credit cards work, you'll join the rest of the population in their love/hate relationship with plastic. As a newbie, however, you should quickly learn a few important aspects of student credit cards. Here are three things to consider initially:

• Fees associated with different credit cards that affect your APR (Annual Percentage Rate).
• How APR and finance charges are applied.
• What balances are used to compute your finance charges.

Other components, features, and drawbacks can vary widely with credit cards. Learning about these three important items will help you understand how credit cards work and how to avoid choosing the wrong ones.

Fees and how they affect your APR

Student credit cards can sometimes carry numerous fees, which may cost you more money and greatly affect your APR. First, students must understand that all cardholders hate fees and all credit card lenders love them. Now that you understand this universal truth, let's move on.

There are more potential fees with some student credit cards than there are choices of hamburgers at Friday's or Applebee's. Among the fees that may be part of your student credit card agreement:

• Annual fees
• Late payment fees
• Over credit limit fees
• Balance transfer fees
• Cash advance fees

If your student credit card has some of these fees, your effective APR will be higher than the published interest rate for the account. For example, say you have a card that has a reasonable APR but also has an annual fee of $100.00. That amount roughly equals the yearly finance charge of a credit card with a 10% APR and a $1,000 average balance for a year. But, this fee is in addition to actual finance charges incurred during the year. Therefore, your real APR is higher because of this fee. Examine all the terms of any credit cards for students that you're considering.

Effective annual percentage rates (APRs)

Interest is the cost of money you borrow. With many loans, it is a simple, understandable concept. Example: If you borrow $2,000 for one year and your interest rate is 12%, you'll pay around $187 per month, or $2,240 over the whole year. Fairly simple.

Now compare that with a potential student credit card. You might have a stated APR of 14% on your "average daily balance" – the amount of your average balance on your credit card during the month. Unless, of course, you took some money as a cash advance during the month, in which case your interest rate increases to 19% for those cash advances.

Suppose you lose track of your charges and go over your card limit. Your rate on your entire balance might increase to 24%. Then you forget your due date and send your payment a little late. Your student credit card specifies that your interest rate increases to 28% when a payment is late. Quiz of the day: Calculate your effective APR for this month on your credit card. Have fun!

Effective APR is the true rate of interest you're paying on your credit card balances. Credit cards for students often include complicated APR scenarios that make it difficult to calculate the real interest rate you're being charged. Know your primary APR and be familiar with the rate increases that will apply if you do other things with your card.

Balance computation used to compute your finance charge

The method of computing your balance will affect your finance charge every month. It may provide you a benefit or a detriment. There are two primary methods of balance computation:

• Average daily balance. Your outstanding balance is calculated every day during the month. These balance amounts are added together and then divided by the number of days in the billing period. The result is the average daily balance used to calculate your finance charge. This is the most common method used.
• Two-cycle balances Some student credit cards use balance activity over a two-month billing period instead of just one. This may result in a higher finance charge.

It's important to note that within these two popular balance computation plans may have a variety of components that compute finance charges differently. Become familiar with the methods used by different credit card issuers.

It is always a good idea to take the time to read agreements that will apply to any credit cards that you are considering. Becoming familiar with the terms and conditions can lower the chances of a surprising even taking place