Credit and Debt Words That Might Fool You

Credit and debt have their own vocabulary, and it’s not always easy to understand. So when you’re puzzling over a credit card statement or your credit report, don’t feel like a fool: Sometimes those terms conceal as much as they reveal.

In honor of April Fools’ Day, we explain a few terms that can trip people up — and offer tips to protect your finances.

Credit limit

This is how much you can charge on a credit card before a transaction may be rejected as “over limit.” That’s all it is. It’s not:

  • How much you can spend without damaging your credit score
  • A calculation of what you can repay comfortably
  • How much other lenders will think you owe on this particular card

Tip: Experts recommend using no more than 30% of your limit on any one card. The lower your balances, the better it is for your credit score. Most credit card issuers allow you to set up account alerts to warn when your balance creeps up.


What “late” means depends on who uses the word. Your credit card issuer will call a payment late and may charge a fee if it doesn’t arrive by the due date.

But credit reports — which are lists of all your credit-related activity — don’t mark payments as late until they’re 30 days overdue. And not all lates are equal when it comes to credit score damage. Thirty days late is not as bad as 60 or 90.

Tip: Pay on time or remedy a late payment quickly; nothing affects your credit scores more than payment history.


If you can’t get a loan on your own, you may need a co-signer. He or she is not simply vouching for your good character. Your co-signer agrees to be fully responsible for the debt if you don’t pay.

Tip: Understand that co-signing is a giant request, not a little favor. And if someone asks you to co-sign, think carefully before putting your good credit on the line.

Credit inquiry

When you apply for credit — for instance, at checkout to save 10% on your purchases or at a dealership to see what the payments would be on the car you just test-drove — you’re asked to sign a consent to check your credit. Those count as “hard inquiries,” which can nick your credit score. The damage is generally small and temporary, but multiple inquiries can add up.

Tip: Know which inquiries won’t hurt your score. These “soft inquiries” won’t affect your credit:

  • When you check your own credit
  • When a creditor you already owe money to checks it
  • When credit card issuers that want to send you a preapproval offer check your credit

Derogatory marks

They sound like the red marks on a pop quiz, don’t they? Derogatory marks are notes on your credit reports about missteps like late payments, collections, tax liens and judgments. If they’re accurate, there’s not much you can do. However, their impact fades with time, and most drop off your reports after seven years. Bankruptcy can stay a little longer, but you can start rehabilitating your credit right away.

Tip: Dilute the effect of a credit misstep by piling up good information. Make all payments on time and keep your balances low.

Preapproved, pre-qualified or prescreened

These words mean that you’re invited to apply for a financial product — and, based on the information a card issuer or lender has, your chances of being approved are good.

Tip: These invitations don’t guarantee approval. Limit your applications for credit, because each one is a hard inquiry.

Payday loans and title loans

Both payday and title loans are considered predatory loans — and for good reason.

A payday loan sounds like a pay advance to just tide you over until your next check. But these come with scary-high interest rates, as high as 390%. And most people end up extending the loan and paying even more.

A title loan puts your vehicle up as collateral and can carry an interest rate of more than 250%. If you can’t pay, you risk repossession.

Tip: Before you get a loan, know all the details: due dates, fees and interest rate. About 36% is generally considered the top of the affordable interest range. Check out payday loan alternatives, such as small-dollar loans offered by some credit unions.

Bev O’Shea is a staff writer at NerdWallet, a personal finance website. Email: Twitter: @BeverlyOShea.

This article was written by NerdWallet and was originally published by USA Today.

The article Credit and Debt Words That Might Fool You originally appeared on NerdWallet.

4 Money Lies You Might Be Telling Yourself

If you’re like many people, you tell yourself little money lies without even realizing it. These lies might justify spending or a lack of savings, or help you avoid dealing with money altogether. Regardless of the reason, they disconnect you from your finances and limit you now and in the future.

If you’re telling yourself any of these money lies, it’s time to take a good, honest look at your financial situation.

1. I just need to get through this rough patch

I hear this one a lot: You can’t save until you’ve paid off your car repair or your daughter’s braces or — enter any other reason here.

People who are always waiting to clear their latest hurdle before they get a hold on their finances never have control. Life is full of unexpected expenses. That’s why it’s important to contribute regularly to an emergency fund. Doing so will keep it ready for the next surprise.

2. I have plenty of time to contribute to my 401(k)

You might have 20, 30 or even 40 years before you plan to retire — but starting to save early lets you take advantage of compound interest and sets you up for financial success and freedom down the line. If you get in to the habit of putting a small amount of each paycheck into a 401(k), it will become second nature and you won’t even notice the missing amount.

The longer you put off contributing, however, the harder it will be to start. Waiting too long to invest could cost you thousands of dollars, if not hundreds of thousands, in the long haul.

3. I deserve this

We all love to treat ourselves, and it’s easy to overspend when you feel like you deserve something. Excuses like “I had a bad day at work” or “I deserve a break” can justify a nice lunch or a pair of shoes you might not normally purchase. This doesn’t mean you should never splurge, but if it becomes too common a practice, it can put a big dent in your budget.

4. When I have a better job, I can be more financially stable

Making more money doesn’t always automatically lead to having more money. You can set yourself up for financial success with the resources you have right now. Start by living within your means, which means buying only things you can afford after paying your bills, paying down debt and contributing toward savings.

You may get raises in the future, but your expenses will likely also increase. If you always wait until you’re making more money to become more financially stable, you’ll always be waiting.

Lying is unhealthy in any relationship, even when you’re doing it only to yourself. Be honest about your spending and savings so you can improve your money habits and have a better future.

Kurt Smith is a financial and relationship counselor at Guy Stuff Counseling and Coaching.

The article 4 Money Lies You Might Be Telling Yourself originally appeared on NerdWallet.

What Is a 401(k)?

Quick facts about the 401(k)

  • A 401(k) is a tax-favored retirement savings account offered by employers
  • Individuals can contribute up to $18,000 a year ($23,000 if age 50 or older)
  • Some employers offer the choice of both a traditional 401(k) and a Roth 401(k)
  • You can contribute to both a 401(k) and an IRA in the same year
  • The biggest drawbacks of a 401(k) are plan fees and limited investment options
  • If you leave your job, you can roll over your 401(k) money into an IRA

A 401(k) is a savings and investing plan offered by employers that gives employees a tax break on money they set aside for retirement.

The catchy name comes from the section of the tax code — specifically subsection 401(k) — that established this type of plan. Employees contribute money to an individual account by signing up for automatic deductions from their paycheck. Depending on the type of plan you have, the tax break comes either when you contribute money or when you withdraw it in retirement.

If this is the point at which you dozed off during employee orientation, you missed the best part.

What’s in it for you

Many employers offer to match a portion of what you save. The 401(k) perk that gets all the headlines is the employer match. If you work somewhere that offers to toss extra money into your account based on how much you contribute — for example, a dollar-for-dollar or 50-cents-on-the-dollar match up to, say, 6% of your contribution amount — stop reading now and fill out the sign-up paperwork. If you do nothing else, at least contribute enough to your account to nab that free money.

This is a good time to mention there are several types of 401(k) plans, including the two main kinds: the traditional, or regular, 401(k) and the Roth 401(k). The traditional, 401(k) offers upfront tax break on your savings. Contributions to a Roth 401(k) are made with after-tax dollars, so you don’t get to deduct the money from that year’s taxes. But don’t worry; the Roth’s payoff comes later.

Pretax contributions make saving a little less painful. Contributions to a traditional 401(k) plan are taken out of your paycheck before the IRS takes its cut, which supersizes each dollar you save. Let’s say Uncle Sam normally takes 20 cents of every dollar you earn to cover taxes. Saving $800 a month outside of a 401(k) requires earning $1,000 a month — $800 plus $200 to cover the IRS’ cut. When they — whoever the “they” is in your life — say that you won’t miss the money, this is what they’re referring to.

Contributions can significantly lower your income taxes. Besides the boost to your savings power, pretax contributions to a traditional 401(k) have another nice side effect: They lower your total taxable income for the year. For example, let’s say you make $65,000 a year and put $18,000 into your 401(k). Instead of paying income taxes on the entire $65,000 you earned, you’ll only owe on $47,000 of your salary. In other words, saving for the future let you shield $18,000 from taxation.

Investments in the account grow unimpeded by Uncle Sam … Once money is in your 401(k), the force field that protects it from taxation remains in place. This is true for both traditional and Roth 401(k)s. As long as the money remains in the account, you pay no taxes on any investment growth. Not on interest. Not on dividends. Not on any investment gains.

… at least for a while. The tax-repellant properties of the traditional 401(k) don’t last forever. Remember when you got that tax deduction on the money you contributed to the plan? Well, eventually the IRS comes back around to take a cut. In technical terms, your contributions and the investment growth are tax-deferred — put off until you start making withdrawals from the account in retirement. At that point, you’ll owe income taxes to Uncle Sam.

Here’s where the Roth 401(k)’s superpower is revealed.

A Roth 401(k) gets the taxes out of the way, right away. The Roth 401(k) offers the same tax shield on your investments when they are in the account; you owe nothing to the IRS on the money as it grows. But unlike with qualified withdrawals from a regular 401(k), with a Roth you owe the IRS nothing when you start taking distributions.

How’s that, exactly? Remember we mentioned earlier that, depending on the type of 401(k) plan, you get a tax break either when you contribute or when you withdraw money in retirement? Well, the IRS can charge you income taxes only once. With a Roth 401(k), you’ve already paid your due because your contributions were made with post-tax dollars. So when you withdraw money in retirement, you and Uncle Sam are already settled up.

If your employer doesn’t offer access to a 401(k), you can still reap the same tax benefits from the other big retirement savings vehicle, an individual retirement account, which may raise the question: What is an IRA? Here’s how a 401(k) differs from an IRA and how to take advantage of both at the same time.

Dayana Yochim is a staff writer at NerdWallet, a personal finance website: Email: Twitter: @DayanaYochim.

The article What Is a 401(k)? originally appeared on NerdWallet.

Credit Scores Explained in (Exactly) 250 Words

What credit scores are: Three-digit numbers expressing the likelihood you’ll repay someone who lets you use their money (like a loan or credit card).

Who has a credit score: People who have been listed on an account that was reported to any of the three credit bureaus: Equifax, Experian and TransUnion. An account can be a student loan, car loan, credit card, credit-builder loan or maybe rent. It represents something you are obligated to pay.

Where the number comes from: Data is collected by the credit bureaus, which get the information from lenders, credit card issuers and public records. Then it is weighted to produce a score, typically on a 300 to 850 range. Higher is better. There are hundreds of scoring models, so most consumers have many credit scores.

How do I get started?

  • If someone with good credit makes you an authorized user on an account that’s reported, that can help.
  • Student loans and sometimes car loans can be relatively easy to qualify for.
  • Credit-builder loans and secured credit cards are made for people building credit or re-establishing credit.

What should I do to boost my credit?

  • Pay all bills on time, every time.
  • Use your credit cards lightly — that is, don’t use more than 30% of your credit limit on any card.
  • Keep old accounts open unless you have a good reason to close them (like high fees).
  • Apply for credit sparingly.
  • Consider having both installment (level monthly payments for a set period) and credit cards.

Bev O’Shea is a staff writer at NerdWallet, a personal finance website. Email: Twitter: @BeverlyOShea.

The article Credit Scores Explained in (Exactly) 250 Words originally appeared on NerdWallet.

Image by robuart via 123RF

Copyright: <a href=’’>robuart / 123RF Stock Photo</a>

6 Ways to Manage Money After Your Epic Budgeting Fail

Do you ever completely screw up your budget? You have a few days or weeks when you manage money perfectly and then all of a sudden you just massively blow it out of the water?

This happens to everyone at least once. Even the most perfect of budgeters have a moment where they flat-out don’t manage money well.

And the aftermath is the worst part. Especially since the emotional repercussions of a blown budget can create an uphill climb.

Luckily, a blown budget isn’t the end of the world. These tips will help you manage money like a pro, even when the circumstances are not what you intended.

3 ways to manage money after a budgeting mishap

1. Return it if you regret it

If you regret the purchase and are able to return it, do it. This is the easiest way to erase the thing you now believe to be a mistake.

Be careful. Returning it in person means you have to go back to the scene of the crime. And stepping foot in the store again could lead to more unplanned purchases.

Even worse, if you only get a store credit in return, you might feel obligated to immediately use the credit. In that case, you might be better off keeping what you bought.

Also, keep in mind that buying, regretting, and returning can become a vicious cycle. Be careful not to view returning things all the time as a real solution to the problem.

2. “Borrow” from other budgeting categories to come out even

If you’re sticking with whatever you spent the money on – or if it’s not a thing that can be returned (such as a dinner out) – “borrow” from another area of your budget. Then you can come out even at the end of the month.

For example, say you overspent on groceries but underspent on entertainment. Remove the difference from your entertainment budget to break even on the overall budget.

You can do this literally if you’re on the envelope budgeting system. Or you can make these adjustments on whatever app, document, or spreadsheet you use to manage your money.

Don’t have any tools to manage your money? Remember: you make what you measure. Start tracking your spending now.

Borrowing from other categories is a great way to find flexibility in how you manage money. However, it can become a crutch if you’re not careful. If you find yourself doing this every month consecutively, re-do your spending plan.

3. Go on a no-spend week to get ahead

If you don’t have any flexibility in your budget to borrow from other areas, create it. The best way to do that is to go on a no-spend week. This can help you break even or can be used in addition to the tip above to get ahead.

Here’s how it works: If you have a certain amount of money budgeted for coffee or lunches out, then forego both for one week and make your coffee and lunch at home. Or, if you had money planned out for a night with friends, turn it into a night in.

Seven days of not spending a dime, even when it’s money you had budgeted for spending, can make up for money management mishaps.

You might even find that you enjoy your no-spend week and make it a reoccurring event. Some people do this once a month or quarter for practice (and the quick and easy boost to their savings).

Once you’ve stopped the bleeding, it’s time to dig deep

Once you’ve used these quick fix strategies to get your budget under control, it’s time to dig deep to find out why it happened.

You may not be able to stop the past, but you can learn from it. And even though everyone has a budgeting slip up occasionally, everyone does it for different reasons. Discovering your reason is the key to managing your money effectively.

It could be that you were using retail therapy on a bad day, that you rebelled against a too-restrictive budget, or that you simply lost track of your spending for the month.

Whatever it is, once you understand why, it’s a lot easier to prevent it from happening again. Here are a few additional strategies to help with managing your money:

1. Build an emergency fund

First things first: any time your budget is feeling the squeeze, build or buff up your emergency fund. An emergency fund is important for preventing turning to credit during an unexpected event.

There are many opinions on how much money to have in an emergency fund, but a good rule of thumb is saving three months to one year of living expenses. Since this can take a long time, the important thing is to focus on slowly and sustainably growing this fund.

And if you need a little extra support, go to the America Saves accountability pledge. You can even sign up for text message tips to help.

2. Create a “splurge” budgeting category

Since an emergency fund isn’t supposed to be used unless absolutely necessary, you could also try creating a “splurge” budgeting category. This category creates a little room for the occasional splurge.

With a splurge budget, you don’t have to feel restricted by your spending plan. Instead, you can see it as the thing that keeps you on track with the occasional pat on the back.

You can even partake in National Splurge Day. A little reward can go a long way in managing your money sustainably.

3. Discover the best savings strategy for your personality

One thing you’ve probably noticed is these tips require saving money. It goes without saying this is easier said than done.

So how can you stay motivated to save money? Hack your personality.

U.S. News & World Report illustrates several personalities and ways to save more based on each one. This includes the goal-setter, the gambler, the nervous Nellie or Norman, and the lazy saver. So how does U.S. News & World Report say each one can save more?

  • The goal-setter can create different savings accounts for different topics.
  • The gambler can fulfill their need for risk by setting aside small amounts of money (that aren’t needed) to play with.
  • The nervous saver can seek out high-yield savings that might make them feel a bit safer.
  • For the lazy saver, it’s all about automation.

Customize your money management system

The moral of the story? We’re all different. Therefore, your money management should be customized to your needs and your personality.

Once you do that, you’ll be able to handle a blown budget and create a more effective money management system moving forward.

The article 6 Ways to Manage Money After Your Epic Budgeting Fail originally appeared on

Money Tips for Your Upcoming Study Abroad Trip

With spring break plans booked and paid for, many college students are now looking forward to their next adventure by prepping for study abroad in the summer or applying to do so in the fall.

More than 300,000 U.S. students headed to another country to study during the 2014-15 school year, according to the Institute of International Education. While a semester abroad is a great educational and cultural opportunity, students don’t want to learn money lessons the hard way.

With that in mind, NerdWallet wanted to help students prepare financially for their trip and find out where U.S. students were going. (Hint: for many, it’s just across the pond.)

Money tips to pack before studying abroad

Before students travel, families should hammer out how they can access extra funds if they face a costly emergency or simply run out of money. If you’re a student headed overseas, you have a few options:

Become an authorized user on a parent’s credit card

When you’re an authorized user, you get a credit card with your name on it, but the bill goes to your parent, who is responsible for paying it — so use it wisely. Families who go this route should choose a credit card with no foreign transaction fees and ensure that it works wherever the student is visiting.

Use a debit card to withdraw cash from ATMs

Be savvy and avoid ATM fees to save money for gelato. Look for financial institutions that reimburse ATM fees worldwide. Using a bank that partners with ATM networks or institutions in the country you’re visiting will help you dodge fees, too.

Have your parents transfer money to you

With this tool, you can compare foreign exchange rates and fees for money-transfer services, which provide another way to get cash in a pinch. Depending on the provider and destination, families in the U.S. could send money directly to a student’s bank account or a pickup location within the same day. Getting money transferred to you can be a little trickier than using a credit card or ATM, but it’s a viable option if you need more than what’s in your bank account and you don’t want to rack up more credit card charges. Look into sending and delivery options, expected delivery speeds and foreign exchange rates.

Where in the world American students go

Of course, financial planning and budgeting depend, in part, on where you’re visiting. Below are the 10 countries that received the most American students in the 2014-15 school year, according to the Institute of International Education.

Consider conversion rates when planning your trip, as well as the price differences between here and wherever you study. If you get a jones for a Big Mac in Paris, it’ll set you back the equivalent of $8.46, according to the currency converter. The same burger is a bit more affordable in Beijing, where it runs around $4.20. Take a date to the movies in San José, Costa Rica, and you’d spend about $10.26 for two tickets; they’d be nearly three times as much, $30.58, in Tokyo.

Whether you plan to hit the books in London or see the sights in Rome, tell your bank and credit card company where and when you’ll be traveling abroad. That way, those institutions won’t suspect fraud and suspend your accounts.

Once you’re locked in financially, you can brush up on your language skills, buy a selfie stick and work on other, more fun, aspects of planning for your semester abroad.

Caren Weiner Campbell and Laura McMullen are staff writers at NerdWallet, a personal finance website. Email: or Twitter: @ccampbell_nw or @lauraemcmullen.

The article Money Tips for Your Upcoming Study Abroad Trip originally appeared on NerdWallet.

Image by Samantha Ireland via 123RF. Copyright: <a href=’’>fasphotographic / 123RF Stock Photo</a>

8 Brilliant Security Tricks to Use Against Credit Card Fraud

Scammers are continually finding new and clever ways to get at your financial data. So if you want a good defense against credit card fraud protection, it’s time to build up a good offense.

“Protection against credit card fraud begins with common sense,” says Lee Munson, a security researcher at “The most obvious thing cardholders can do is think about who they are sharing their card data with and how.”

Essentially, cardholders need to use credit cards safely and actively manage their sensitive data to block hackers and thieves. Here are eight clever ideas to prevent credit card fraud in today’s world of breaches, hacks, and data thefts.

1. Approach ATMs with caution

Before you use an ATM, check that no one is watching you first. Then, obscure the number pad when entering the PIN attached to your debit card.

You also have to watch out for card skimmers around ATMs. They have become a common way for fraudsters to get your card information, and thieves often install them on ATMs. Try jiggling the card reader firmly to check for a disguised card skimmer. Additionally, visit ATMs from a trusted bank when possible since these get inspected more frequently for tampering.

“ATMs should always be scrutinized before use to ensure the card slot has not been tampered with by a device that can read all the data on a card inserted into it,” Munson says

2. Black out your CVV number

If you can, try and limit the information listed on your card.

“Obfuscating the three-digit CVV number on the back of the card is also a secure option, though possibly one for the more paranoid,” Munson says.

Still, it couldn’t hurt to scratch off or black out the CVV or security number on the back of the card. This could make it harder to misuse card information if it’s stolen, or by taking pictures of it. Just make sure you memorize it first.

Also, add a note to “see ID”  next to the signature line on your credit card. This should prompt a cashier to double-check your identity. And it gives three points of verification: your name, photo and the signatures on your driver’s license and credit card.

3. Keep your card in sight at all times

“Cardholders should ensure they do not allow their cards to leave their sight,” Munson says.

Restaurants are a common source of credit card theft because your card is handed over and the payment is processed out of sight. Or you might be asked to hand over your credit card to open a tab at a bar.

“There’s always the chance of someone snapping a photo of your card to sell or make a purchase – they even have the CSV,” says Jonas Sickler, marketing director for safety site Servers also might alter the tip you write on the receipt to commit theft.

“A safe alternative would be to pay the food bill with cash,” Sickler says in order to avoid these issues. Tableside point-of-sale systems are also a more secure option.

If you do end up paying with a card at a restaurant, always verify that the transaction amount posted to your account is correct.

4. Double-check account transactions

In fact, you should make it a habit to regularly check transactions on your credit and checking accounts against receipts. This will help you notice and report fraudulent charges right away – so you won’t be responsible for them.

“Look for irregular transactions and notify your bank immediately if you see something suspicious,” says Sage Singleton, security expert for, a home security comparison site. The sooner you catch an error the easier it is to prevent identity theft and avoid losses, she adds.

Many credit card issuers and banks also have a security alert function that notifies you via email or text when any purchase is made. “[Setting this up] is an easy way to keep track of your spending and be notified immediately if something is wrong,” Singleton adds.

5. Choose hard-to-guess PINs and passwords

For debit or chip-and-PIN credit cards, your money is only as secure as your PIN.

Therefore, make it hard to guess. Avoid common PIN patterns like using sequential numbers (1234) or repeating numbers (1122). Don’t rely on easy-to-find personal information like a birthday for your PIN.

Similarly, passwords for financial accounts should be hard to guess.

“Don’t use the same password for every account and create strong, unique passwords,” Singleton advises. “Hackers are extremely tech-savvy and can crack weak passwords (like your maiden name, birth date or anniversary) and access your information easily.”

6. Fake your security question responses

On top of creating secure passwords and PINs, you can also use security questions to help secure your account.

However, hackers can often track down answers to common security questions like “What is your mother’s maiden name?” or “What is the name of the street you grew up on?”

When setting up security questions, try to select an obscure question you wouldn’t expect even a friend to be able to guess. That’s because, unfortunately, identity thieves are often people we trust.

And if there’s no such question available, give a fake answer to the security question. Or treat it like another password and “use a random string of characters as the answer instead of submitting any meaningful information,” suggests Wired.

Just don’t get lazy. Setting easy-to-guess lies like “I don’t know” or “I don’t have one” as security question answers can actually make your account less secure.

7. Protect sensitive data on devices

But your credit and debit card data aren’t just stored on your cards – they can also be found in your smartphone or laptops. That’s why it’s important to protect your phone and computers with secure passwords.

You should also watch out for the networks you use.

“If you’re on a public wifi network, you should never log into private accounts, including social media or bank accounts,” Sickler says. “Don’t make any purchases either, because hackers can literally capture your information right out of the air.”

If you use a shared wifi network, even if it’s with roommates, look into setting up a virtual private network (VPN).

“A virtual private network (VPN) is imperative if you use credit cards online,” says Mike Baker, founder of cybersecurity provider Mosaic451. “VPN networks are designed to encrypt information before it goes through a network, thwarting potential attacks and making online purchases safer.”

8. Only shop online through secure retailers

Online retailers can also be a point at which hackers will try to get at your credit card information.

“When shopping online always be careful to make sure you are on a secure website,” suggests Alex Reichmann, CEO of security device company iTestCash. Therefore, if it’s a retailer you don’t recognize, do a little research to ensure it’s a legitimate merchant.

“It is also an extra protection if the website you are shopping on is SSL-secure which prevents fraudsters from interfering with the websites transactions,” Reichmann adds.

“For an added layer of security, consider a virtual credit card or even from independent services like PayPal,” Baker suggests.

Stay vigilant against credit card fraud

Your identity is key to your financial world, accounts, and credit history. “It is vital to take every precaution to safeguard your identity,” Singleton says.

With advances in payment technologies, credit card fraud is easier than ever to perpetrate. But you also have more tools and strategies at your fingertips to protect yourself.

The article 8 Brilliant Security Tricks to Use Against Credit Card Fraud originally appeared on

Applying to College? Expect to Pay at Least This Much

College attendance costs get all the attention, but you’ll start paying for school when you begin the application process. Factoring in the costs of test preparation, test taking and applications, expect to spend at least $678 — and perhaps thousands more — before you’ve received acceptance letters, according to NerdWallet’s calculations.

Read on to learn more about the college application process and how you can cut costs if they’re unmanageable.

Application fees

When asked how many applications students should submit, “It depends” is the answer college admissions experts give most. They mean you should apply to a mix of safety and reach schools, as well as “match” schools that are likely to be good fits — between five and 12 schools total.

If you’re worried about affording tuition, you might benefit from applying to more schools, says Mandee Heller Adler, founder of International College Counselors, a college advising company based in Fort Lauderdale, Florida. You’ll pay more in application expenses, but if you’re looking for scholarships, the more opportunities, the better.

“My merit scholarship students apply to more schools than other students,” Heller Adler says. “You can’t be 100% sure how much a merit scholarship might be, so while I usually recommend seven schools to students, merit scholarship students should apply to closer to 10 schools.”

Application fees range up to $90, but the most common amount is $50, according to a 2015 U.S. News survey. For our calculations, we assumed that students would apply to eight schools and pay $400 in application fees.

Taking the test

Choosing to take the ACT, the SAT or both isn’t a matter of cost: The two tests are widely accepted and similarly priced. Experts say you should take both and report the results of your highest-scoring exam.

Without the essay, the SAT costs $45 per student, and the ACT costs $42.50. We assumed a student would take each test once, then take one a second time. To approximate the costs of taking one of the tests a second time, we averaged the two costs ($43.75).

“If you do have a test you score better on, then we say, repeat your stronger test,” says Beth DeBeer, high school guidance counselor at John Jay High School in Cross River, New York.

The price of each test includes the option to send your scores to up to four schools. Additional score reports cost $12 each for either test. If you apply to eight schools, you’ll likely need four additional score reports, costing a total of $48.

Preparing for the test

To prepare for the SAT or the ACT, some students use books or online practice tests; others hire private tutors. Online test prep courses are a good middle ground for many. In our calculations, we used the cost of an online course by the test prep company Magoosh, which partnered with NerdWallet on this study. Their six-month online course costs $99. College preparation stalwarts Princeton Review and Kaplan each charge $299 for a self-guided SAT online test prep course.

Applying to college could cost much more

“At least” is the operative term when ballparking college application costs. You’ll see your test prep expenses increase quickly if you hire a tutor at $100-plus per hour or opt for a pricier test prep course. Princeton Review’s “Ultimate Classroom” option, for example, is a traditional classroom prep course that starts at $849, while Kaplan’s “Unlimited Prep” option costs $1,599. It lets you take and retake PSAT, SAT and ACT courses as often as you want until December of your senior year.

Add-ons such as the essay, an SAT subject test, or additional score reports also increase overall costs:

Additional costs SAT ACT
Test with essay $12 more $16 more
Subject test $26 (flat rate registration fee for up to three subject tests) + $20 for each test N/A
Additional score reports (four are included) $12 each $12 each
Rush/priority score reports $31 $16.50
Late registration $28 $27.50
Test date or center change $28 $25
Preliminary test (if not covered by your high school) $16 $12


Visiting a far-off school can also add to your application expenses. And some students can’t afford the costs of travel, accommodations and food.

However, the college visit can signify interest, an important admissions factor, especially at the most competitive schools. According to the 2015 State of College Admissions Report by the National Association for College Admission Counseling, 16.9% of colleges surveyed said a “student’s demonstrated interest” was of considerable importance and more than one-third said it was of moderate importance.

It’s an important factor in admissions to Connecticut College in New London, Conn., says Andy Strickler, the school’s dean of admission and financial aid. But the college recognizes that visiting campus can be cost prohibitive to some applicants, so it hosts an annual fly-in program known as Explore Weekend. During this weekend, interested students from underrepresented groups receive transportation to campus, lodging and meals. Many colleges nationwide offer these programs.

“There’s a certain level of access that’s afforded to families who have socioeconomic means at their disposal, so this is an effort on our part to combat that barrier to the process that socioeconomically disadvantaged families might experience,” says Strickler.

Other ways to save on college applications

If your family can’t afford application costs, there are other ways to save. First, ask prospective schools about fee waivers. Schools typically require only that a high school guidance counselor confirm you qualify. You might if you benefit from free or reduced lunch programs.

“I haven’t run into any institutions where an applicant says an application fee is a barrier to apply and have not been granted a fee waiver,” says Strickler, adding that among Connecticut College’s nearly 6,000 applicants last year, one-quarter were granted a fee waiver.

The SAT and ACT also offer fee waivers, and there are less expensive ways to prepare for standardized tests, including borrowing materials from your high school or local library. Some colleges today don’t require a standardized test at all; if one of these is on your list, you stand to save some money.

Next steps

Once you’ve been accepted and chosen a college, turn your attention to financial aid. Exhaust your federal options first, including federal student loans, scholarships and grants. Private student loans generally carry higher interest rates, but can help you cover additional expenses if necessary.

Anna Helhoski is a staff writer at NerdWallet, a personal finance website. Email: Twitter: @AnnaHelhoski. Victoria Simons is a data associate at NerdWallet. Email:


  • College application fee: $50, the most common amount reported by schools to U.S. News in a 2015 survey.
  • We assumed students would apply to eight schools (8 x $50 = $400 in application fees).
  • SAT fee, without essay: $45.
  • ACT fee, without essay: $42.50.
  • We assumed each student takes both tests once and takes one test again. We averaged the cost of both tests to represent an approximate cost of taking one test an additional time: $43.75.
  • Because only four score reports are included in the base cost of the ACT or SAT and we assumed each student applies to eight schools, we assume students will pay $12 each for four additional score reports: $48 total.
  • We used the cost of Magoosh’s six-month online SAT prep course ($99) to calculate the minimum a student might spend on college applications.


The article Applying to College? Expect to Pay at Least This Much originally appeared on NerdWallet.

Image by Jim Vallee

Copyright: <a href=’ / 123RF Stock Photo</>