Credit Cards

3.370 x 2.125 inches of trouble

Try to imagine being in your late twenties and still paying off a spring break vacation you took in your senior year. Sound crazy? Unfortunately, it’s a reality for many college graduates.

More students than ever before are carrying plastic in their wallets. In fact, 83 percent of undergraduate students have at least one credit card. Students often have a hard time paying off their card’s monthly balance, and many slip into debt. The average credit card balance for college students is nearly $2,000.

The Truth About Credit Cards

Perhaps the best advice that can be given to college students concerning credit cards is this: don’t get one if you have doubts about your ability to handle it. If you don’t have a credit card, you can’t get into credit card trouble. Sure, they’re cool to have, but credit cards aren’t free money. They’re high-interest loans. Credit card companies are looking to take your money in several ways, including:

  • Interest. Every month, the unpaid portion of your credit card bill is charged interest (which can be as high as 18 to 20 percent). Interest begins accruing immediately for the cash advances that some credit card companies offer.
  • Fees. Some credit cards charge you annual membership fees that can be as high as $100. You can also be charged fees for getting a cash advance and making late payments.

The next best advice is this: don’t buy things you can’t afford. This should be obvious, but it’s something that an astounding number of students either don’t realize or choose to ignore. If you decide that you need a credit card, only get one and always use it wisely. Keep it with you for emergencies (e.g. a car breakdown when you’re on a road trip), but don’t go on a shopping spree just because a credit card allows you to. If you want to make a large purchase, save up until you can afford to do it with cash instead of credit.

Credit card debt is far worse than most student loan debt. It begins to accrue almost immediately, and it has a much higher interest rate. This brings us to our third and final piece of advice: do whatever you can to pay off your entire monthly credit card bill. Getting into the habit of only paying the minimum balance is very dangerous. A much better habit to form is to go online and pay off your bill immediately after it arrives in the mail. If you put the unopened envelope on a table somewhere, you’re likely to forget about it and, before you know it, the interest will be piling up.

The Positive Side of Credit Cards

Credit cards do offer one valuable thing to students: they help you build a credit history. Provided you use your credit card wisely and always pay off the full balance, you can build a good credit history that will help you get a loan or mortgage in the future.

Advertiser Links for Credit Cards
[what's this?]