Graced with Credit Card Offers, College Students Should Avoid Credit Debt Traps

| August 6, 2012

After high school graduation, comes college, after college comes a barrage of tempting credit card offers, and everybody knows what comes next: credit card debt.

College students attend university to get an education, but oftentimes basic guidelines relating to credit card offers and credit card spending is left out of the curriculum. According to Sallie Mae, the average college student has more than four credit cards and owes a total balance of $3000 at any given time. Credit card companies like to aggressively market to college students because many students focus on the good things they “get” with credit cards (easy access to material desires), and pay less attention to the not-so-good things included in the offers (potentially high interest rates, hidden fees, and high late fee penalty charges). Credit cards are a convenient and useful tool, but college students should be wary and make sure they don’t get much more than they bargained for.

As a college student, you can easily avoid credit card traps and make credit cards work for you.

Choosing a credit card

  1. A free t-shirt or mug does not a good credit card make. Just because you’re offered a novelty gift doesn’t mean the credit card you’ll get is worthwhile. Compare the credit cards offered to you by looking at the usage fees (if any), interest rates (referred to as APR), minimum spending requirements and other potential commitments. Usually student credit cards do not charge an annual fee and offer a low interest rate. They also limit you with a low credit limit, but if you’re just starting out – this could actually be to your benefit.
  2. Cultivate a monogamous relationship with your credit card: 1 is enough. Even if you have money to spend, no need to make life complicated with more than 1 credit card. (If you build good credit over time, your credit card company will most likely be happy to increase your limit.)

Using a credit card

  1. Know that paying your credit card bill is THE most important thing you need to do when you own a credit card. Credit card companies make money off of you when you don’t pay on time through their added interest charges and late penalty fees. If you pay your credit card bill on time (For example, you can pay the bill of your GE cards on, then you’re basically enjoying a pretty useful service for little to no money.
  2. Paying the minimum amount should be reserved for emergencies only. When you pay the minimum amount you’re still in OK shape, but the interest will start piling up, and then you’ll end up paying a much higher price on the items you bought, just because of the added costs piled on by your credit card processor.
  3. Your credit card directly affects your credit score, which affects your chances for getting approval on a loan, a lease, renting an apartment – basically anything that someone else needs to approve for you to enjoy. Keep your credit score good and healthy by paying your bill on time, in full (best option) or the minimum owed (2nd-best option.)
  4. Monitor your spending over time to avoid embarrassing rejections by vendors notifying you that you’ve reached your limit. It’s also a good idea to keep an eye on your spending, so that you can pace it out over time. That way, you can spend your money on the items you really want, and pass off on the items that just aren’t worth it.

Credit cards can be a blessing or a curse. As a college student, keep things simple and make the right decisions to prevent you from debt traps. Doing so will keep you out of trouble, and let you focus your time, attention and energy on what matters most in college: your grades and the parties.



Category: Credit Cards

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