Using Credit Cards Wisely in College

It is no secret that most college students are broke. It is the age-old story. However, some students fall victim to the credit card trap and have a very difficult time getting out from under the mountain of debt they find themselves under. On the flip side, some students are able to make smart decisions with their credit cards and can actually begin to build some decent credit in their names. Unfortunately, most students seem to represent the former of these two options. There are some fairly reasonable steps students can take to protect their current and future financial situations.

If you are going to take out a credit card, there is one rule you need to make and stick to: only make purchases that you can pay off in a timely fashion. Ideally, you would be paying off your credit card balance at the end of every month. This way you are avoiding the ridiculous interest charges credit card companies assess to accounts. You are also establishing a strong credit rating. This becomes such an important part of your life after graduation. A poor credit rating can affect your ability to take out loans or mortgages. Some companies will even look at a prospective employee’s credit score before hiring him or her.

With this in mind, you need to limit the purchases you make with your charge card. Maybe you buy some of your textbooks at the beginning of the semester on your credit card to defray some of the expense at the time you are buying all of your books. Pay for the occasional meal on your card. The one thing you must avoid is putting your card down at the bar and treating all your friends to all that night’s rounds of drinks. You may love your friends, but be sure you can face the consequences the next morning when you check your account online.

College students are often given extremely high interest rates. These rates can be as high as 20%. This means that whatever you initially bought with your credit card will wind up being 20% more expensive when you finally get around to paying your credit card. This is another reason to pay your balance each month. Also, avoid simply paying your minimum balance. Credit card companies secretly love when people do this as they will be able to collect interest for a much longer period of time than the conscientious consumer who pays their bill off in a timely fashion.

This entry was posted on Wednesday, June 9th, 2010 at 11:55 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.