A College Student's Guide to: Responsible Credit Card Use
Your college years will teach plenty of valuable lessons, but perhaps one of the most important things to learn about is how to protect your financial future. Many college students find themselves in the throes of credit card debt by the time they've graduated, leaving them in debt before they have even ventured out into the real world. It's important to maintain a good credit score so you can buy the important things in life, like a new home, car, or other big-ticket items. If you have a credit card in college, it can be extremely tempting to spend this "free money" on things like clothes, food, and even beer. But too much debt can have a negative effect on your credit that you will feel for years to come. Understanding how credit cards work and how to be responsible with them is the key to avoiding problems in the future.
Today's college students typically already have at least one credit card, which can open the door to careless spending at a young age. Very few pay their balances in full every month, and many end up using the card's cash advance feature to get money to use for a variety of things they otherwise may not have the cash for. Those cash advances carry a significantly higher interest rate than card purchases, pushing the student even further into debt. In fact, some students even end up in bankruptcy or default before they've even graduated. This scenario does not set up a positive building block for a bright financial future.
- Many college students receive their first credit card from their bank or by filling out an application online or by mail.
- Approximately 6 million full-time undergraduate students already have a credit card.
- About 13 percent of college students have debt ranging from $3,000 to $7,000.
- Congress passed a law in 2010 to help protect college students against unscrupulous credit card companies.
- Credit card debt is most prominent among adults of college age, between 18 and 24.
- Most people who are still paying back their college debt are in their 30s and older.
- In one study, 37 percent of college students said that finances were a major source of stress.
- In most cases, college students use their credit card for non-emergency purchases.
- A US PIRG survey showed that 25 percent of college students used their credit card to pay for tuition costs.
- A study done by Sallie Mae showed that 23 percent of college students already had a credit card before enrolling in school.
When it comes to being wise about your credit card debt, there are several things you should and shouldn't do in order to protect yourself. Keep in mind that these do's and don'ts are not the only things you should be mindful of when it comes to debt and spending. These are just a few examples of things that can help you to become a more financially savvy student, so be sure to do your own research as well. Make sure you compare different credit cards, look at your current job situation, and be very aware of your own personal finances when it comes to your credit.
- DO pay your balance in full each month if you can. This will help keep your score high and your debt low.
- DO make your monthly payments on time or else you can be hit with late fees and other penalties.
- DO check your statement every month for errors and dispute any charges you think are incorrect to protect your credit.
- DO try to limit your credit card spending to emergencies and important things only whenever possible.
- DO keep your personal information, password, and other identifying details safe and secure to avoid fraud or identity theft.
- DO shop around and compare different offers before getting a credit card so you can be sure you're getting the best rates.
- DO consider enrolling in an automatic payment plan so you won't have to worry about missing your payments.
- DO pay with cash whenever possible and avoid using your credit card unless you absolutely need to.
- DO understand the impact that using cards can have on your financial health and consider the implications that this kind of debt will have for you later.
- DO limit the number of credit cards you have to just one so you won't be tempted to spend even more money.
- DON'T forget that your credit report will have an impact on your future, so be sure to monitor it regularly.
- DON'T apply for cards in your freshman year, so you can avoid debt in your early college years.
- DON'T use the cash advance feature that comes with credit cards or you will face high interest rates and a huge balance.
- DON'T use your credit card to buy the latest designer jeans, cool jewelry, or other frivolous things. You could end up with a lot more debt than you planned on and much sooner.
- DON'T let a friend or roommate borrow your credit card. Your card should stay with you at all times and only be used by you.
- DON'T apply for store credit cards, which can have a much higher interest rate than regular cards and make offers that can tempt you into deeper debt.
- DON'T assume that a small charge here and there on your card won't add up quickly. Understand the impact that every purchase has.
- DON'T be afraid to ask for help if you need it. If you find yourself in over your head, there are credit counselors who can help get you back on track.
- DON'T miss a credit card payment or pay it late. This can have serious implications for your balance and credit score.
- DON'T forget that a credit card is actually a loan that needs to be repaid. Consider this fact every time you're thinking of using the card to buy something.