Credit Card Responsibility for College Students

College students can get into a world of debt by misunderstanding and misusing credit cards.  With high interest rates (as high as 30%!) and fees even with moderate spending, students can bury themselves in debt which can take a lifetime to repay.  It’s important for students to dispel any myths or preconceived notions that they may have about credit cards. Understanding the facts is key.   

Instant Gratification

Some students fall under the spell of the instant gratification that credit can offer.  The notion of being able to have that which you want, immediately and with no cash out of pocket can be a temptation that is difficult to resist.  By utilizing a payment method that charges interest, students will pay far more for the items they buy than if they had just waited until they could afford them with cash. 

Teaser Rates

Don’t fall for low teaser rates. These rates are only low for a short time and are incentive to open the account.  Once the interest rates begin to increase it will become harder to pay off your balance, particularly if you only make minimum payments.   Try to (if possible) pay off your balance at the end of every month and at the very least attempt to pay more than the minimum payment due.

Credit Cards and Building Credit

One great misconception is that you must have credit cards to build your credit.  Because of this, some students will open multiple credit card accounts, and typically the more credit that's available, the more spending that occurs.  Students can establish a good credit rating in as little as six months by simply opening up retail and phone accounts.

If you insist on having a credit card to build credit, open only one account and use it sparingly.  Use it to purchase items you have the cash to pay for, and then pay off your balance every month.  This will help you avoid paying interest while still building your credit rating.

Stay Current

Credit card companies are in business to make money.  They do so by charging you fees and charging interest.  Always stay on top of your finances, know when your payments are due and how much you must pay to stay in good favor. Late payments can cause a landslide of negative effects like a decrease of your credit rating, late fees which can add up quickly and higher interest rates.  Staying current will not only maintain a good credit standing, it will help you to avoid fees which can rack up quickly.

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