Here's a reality check on credit cards The average college freshman who enters school debt-free in September accumulates over $1,500 in credit card debt by May (Nellie Mae Credit Card study). Let's say you rack up $1,500 on a card that charges 19% interest and you pay the minimum required payment each month. It could take up to 17 years to pay off the balance! Sound unbelievable? Visit this credit card payoff calculator and see for yourself.
Credit cards: That dangerous convenience "Studies show when people use credit, even if they pay their bill off every month, they tend to spend 30 to 40 percent more than if they paid with cash," noted Michelle Singletary, the Washington Post's nationally syndicated "Color of Money" columnist and author, in a recent online Post chat with her readers.
Singletary doesn't mince words on the danger of credit cards: "Using credit irresponsibly is EVIL … Credit just takes hold of people, and they lose their everlasting financial common sense. We really ought to be pushing more people to use cash. Cash makes you live at or below your means. And nobody NOBODY who is in college should be using a credit card."
Still feel that you need to have a credit card while you're in school? Then seriously consider, and take action on, the following:
Be sure to compare card offers Some excellent sites for credit card comparisons include www.cardweb.com and www.bankrate.com. Take a look at the Federal Reserve Bank's checklist for comparing credit cards and the Fed's semi-annual survey of credit card plans.
You're looking for a credit card with:- No or low annual fee
- Low, fixed interest rate beyond introductory period
- Grace period that allows a certain amount of time (generally 25 days) to pay in full before interest charges are applied
- A clear breakdown of all other fees, charges, and terms and conditions
Before using a credit card, ask yourself:
- What would happen if you didn't purchase a particular item? If nothing, don't buy it.
- Could your purchase be delayed for another time? If so, delay it.
- Are you considering a purchase because you really need it or just want it? If you just want it, resist it.
- If you do need a particular item, is the less-expensive brand good enough? If so, choose it.
And keep these in mind:
- Make payments on time. Late payments will negatively affect your credit history.
- Don't make purchases unless you are certain you can pay them off in one or two payments.
- Know the difference between a want and a need.
- Remember, if you can wear it, drink it, or eat it, it's not an emergency.
For more information on credit cards, visit Nellie Mae's Credit Education section.
Identity theft: It could happen to you! Not only can unwise credit card use get you into financial trouble, it can also leave you victim to one of the nation's rising crimes: identity theft. Protecting yourself against identity fraud should be a top priority. With a surplus of credit card offers and "swipe machines," falling victim to identity theft has become easier than ever. Learn how to protect yourself from becoming a victim of identity theft and what to do if you have been victim.
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