Paying with a credit card is easy; all you have to do is sign. Anyone can do that, right? But undergraduate credit card debt is more serious than you think. All those gifts that you thought were free are really not and all those rates you think are low are actually quite high.
In a survey by the student loan agency Nellie Mae, 83 percent of college students have at least one credit card and an average balance of $2,327.
Only 52 percent of freshmen have credit cards. By sophomore year, the percentage increases to 92 percent.
“Having a credit card is really convenient,” said Nicole Blyth ’05, “as long as you watch your balance. If you don’t, your balance can really build up.”
The survey found that 21 percent of students who have a credit card have a high balance of $3,000 to $7,000.
According to a study by the U.S. Public Interest Research Group (PIRG), students who sign up for credit cards at college campuses tend to have large balances that are paid off later.
Credit card companies want undergraduate student customers, so while students attend school credit card companies allow students to apply for numerous credit cards without even having an income.
“Students, often without jobs and often facing large student loan and other school debts, should be careful not to make things worse by running up unnecessary, high-cost credit card debt, since they risk ruining their credit records if they fail to pay on time,” stated Ed Mierzwinski, U.S. PIRG Consumer Program Director.
Nellie Mae suggested these questions for students to ask themselves while shopping for credit cards: Do I need it? Can I afford it? Will I pay the bill every month?
If you’re able to answer ‘yes’ to all three of these questions, then a credit card might suit your lifestyle. If you are not, then perhaps it’s best if you continue to use cash.
Take time to learn about credit fees. It’s possible to pay numerous charges for credit cards like annual fees, late fees, over limit fees and transaction fees. Before you commit, learn how to calculate how much you will pay in interest per month. Become familiar with your credit card statement. Check each month to make sure the statement is correct. And lastly, do not just pay the minimum fee each month.
If you don’t want a credit card, then another possible alternative that many students use is debit cards.
“I don’t rack up bills with debit cards,” said Lauren Correia ’05. “With debit cards, it’s just easier.”
Debit cards are linked to checking accounts and work similar to credit cards. However, you just have to remember that debit cards use real money.
But remember, just because you have a credit card doesn’t mean you have to use it. Be smart and don’t spend someone else’s money if you’re not willing to pay them back. If you use a debit card or cash, then the choice is yours.
Learning about responsible credit card use now might save you from credit card debt after you graduate. Outstanding bills will hurt your credit report and subsequently hurt your possibility of buying a new car, renting an apartment or being approved for another credit card. Do you really want that to happen?
Leave a Reply