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.
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.