Thursday, August 15, 2013

10 Things College Students Should Know About Credit Cards

College students are like chum in the water for the sharks than run credit card companies. Many students get suckered in when creditors begin flooding them with offers in the mail or even set up booths on campus pitching the virtues of credit cards, and though it's often a necessary evil to hold and use a card, many students aren't given the right information about how to use credit properly. If you're a student learning to navigate the waters of credit or a graduate looking to get your spending in shape, these guidelines will get you where you need to go.
  1. You Need Them Less Than You Think You Do: Legions of sob stories have been born by fresh college graduates getting in over their heads with credit card debt. But the plain truth is you need a credit card a whole lot less than creditors want you to believe you do. Sure, you'll need to open a line of credit to help boost your credit score, and life-threatening emergencies can call for one, but really, that's about it. In the words of Louis C.K., people used to run out of money and, rather than charge purchases, say, "Well, I can't do any more things now." The moment you start to realize that life's better when you spend less than you earn, you'll be free. 
  2. Interest Rates Are Murder: College students are among the most susceptible to the lure of easy credit thanks to the magical phrase "low introductory APR." The key is to remember two things: "low" is a relative term, and "introductory" means that you'll soon find your smaller rates swapped out for big ones. If a card offers zero percent APR for six months or a year, it's just the company's way of getting you hooked on easy spending before hitting you with rates that could be as high as 20 percent. Think about that: you'll be paying interest worth one-fifth of your balance, and that's not even the principal. Always, always, always know what the real APR will be.
  3. Always Make More Than the Minimum Payment: One of the provisions of the Credit Card Accountability Responsibility and Disclosure Act of 2009 (or, cutely, the Credit CARD Act) is that creditors are required to disclose how long it will take you to eliminate your debt if you only make the minimum monthly payment. The minimum payment will keep you out of trouble but not do much of anything to knock out the principal amount you owe. If you owe several thousand dollars, it could take decades to get clear if you only pay the least amount possible. Statements now also display how much you will need to pay each month to eliminate the debt in three years. It's best to pay as much as ... Read the entire article.


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1 comment:

Anne, pro-education for all said...

I would suggest ONLY getting a credit card for ease of payment (and paying full bill each month) or for emergency (you need a textbook and don't have the money for it); THAT`S IT!
A credit card is a very expensive way to borrow money - instead, get a student loan, a loan from the bank, a loan from your parents. The interest rates of these will be much cheaper.

See more tips on living a frugal life while being a student at
http://thebudgetstudent.blogspot.ca/

"Simplicity of living, if deliberately chosen, implies a compassionate approach to life. It means that we are choosing to live our daily lives with some degree of conscious appreciation of the condition of the rest of the world." Duane Elgin

"Do what is good with your own hands, so that you might earn something to give to the needy." Ephesians 4:28