Credit Cards; Friends or Foes?

That's up to you! 

By Tara Goodfellow

 

There are thousands of articles berating financial institutions and how they take advantage of consumers and specifically college students.  That doesn't have to be your experience.  You can, and should, build a strong, positive relationship with your bank that will serve you well and assist you with many financial milestones in the years ahead.  The road to that positive relationship starts with the first service for which you sign up. More than likely, that will be a checking account, savings account, or credit card.  From the very start, this can be a step in the right or wrong direction.  That is up to you, not the bank.
 
Your relationship with credit cards depends upon your current financial situation, your concept of money, and your ability to read small print. Know that before you spend! Often times, we learn by trial and error.  In some instances, that can be an effective process. Don't adopt that motto with money. Learn before you get burned. It can save you thousands.
 
 Here's how:
 
Before you sign anything, read it. Read all of it. Understand everything. Ask questions. It's tempting to grab some free pizza coupons for just signing up for a credit card on campus; however, the better deal may be to pay full price for the pizza and skip the plastic.
 
Wait a while for a credit card if:  

• You are a "must see, must have" person
• Are unorganized
• Have never completed a budget
• Have no idea how you'd pay off a credit card monthly
• Don't have a job

Good for you for realizing now is not the time to go into debt! Consider these options:

• An ATM and/or Debit/Check card
• Getting "cash back" from your debit card after a purchase once each week
• Giving yourself an allowance to learn how to budget
• Writing down all of your expenses to see where your money goes
• A card that must be paid in full each month

So you've decided you can handle a credit card. Some good habits to adopt:

• Review your APR and benefits 
• Check your statement for accuracy every month
• Evaluate your purchase habits
• Don't keep switching cards
• Don't sign up just because of free offers of saving 10% at a store
• As your spending habits change, or life events occur, review other options that might better meet your new lifestyle

According to Sallie Mae's research, the average undergraduate college credit card balance has increased from $2,200.00 to $3,713.00 just since 2004. Considering 82% of college credit card holders carried a balance means more than likely you'll be paying even more after you tack on the interest. The average amount of freshmen credit card debt is slightly over $900.00, so we'll use those numbers for our analysis.  There's a lot of talk about interest, so let's take a look at a possible situation.