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A College Student’s Guide to Credit
It is easy for the college student to get caught in the credit card trap. Approximately 83% of college students have credit cards. Creditors set up booths on college campuses to lure students in to fill out applications in exchange for a T-shirt or some other gimmick. Creditors know two important things: a college student usually keeps their first credit card for approximately 15 years, and parents will often pay if the student falls behind. While banks and retailers look to college students for new business, it is also the perfect time to begin establishing good financial health. One-fifth of graduate students in 2000 had credit card debt ranging from $6,000-$15,000. Here are some guidelines to follow.
Talk with your parents. Ask your parents their experience using credit in order to prepare for becoming a good credit consumer.
Start with a secured card. With a secured card, you deposit money into the account and then you can charge only up to that limit. Once you’ve shown you are responsible with a secured card, you can move onto a regular card.
Compare credit cards. Shop around for the best terms with www.BankRate.com or www.CardWeb.com. Picking the right card can save you money.
Pay your balance in full at the end of the month. This is a good way to establish and build credit. It also shows creditors that you aren’t spending beyond your means and can handle repayment obligations.
Always pay on time. A single slip up will place a black mark on your credit report for up to 7 years. In addition your creditor may increase your interest rates as well as charge you a $35.00 late fee.
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Avoid making only the minimum payments. Just paying the minimum is a trap. If you pay off a $1,000 debt on an 18% interest card, by just sending the minimum payment each month it will take you 12 years to repay.
Create a budget. Identify income such as financial aid, money from
parents, part-time job etc. Then list expenses such as books, meals,
clothing, and entertainment. This way you can identify how much you
can afford to spend.
Don’t collect a drawer full of credit cards. Get one card with a low limit and use it responsibly before you even consider getting another one.
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