Avoiding the Credit Card Trap While in College

It’s not uncommon for college students to be bombarded by credit card offers. The idea of having credit, of being able to buy something now and pay for it later is appealing to many.

However, it is important to avoid getting in over your head in credit card debt in order to preserve your credit rating and reputation in the future, especially as you leave the academic world to head into the business world.

According to a 2013 Fidelity survey of some 750 college graduates, the majority of grads were leaving school with at least $3,000 in credit card debt.

P&C Unit6C Slide 22

Choosing Credit Wisely

When looking at credit card offers, don’t sign up for every one that comes your way.

While it is good to have a credit card to establish a credit history, you need to limit yourself to one or two major credit cards. Avoid store cards and other special credit options.

Take the time to compare cards and interest rates. Make sure you get the best deal possible from the available offers.

Manage Credit Carefully

Once you have a credit card, be careful in how you use it.

Don’t buy things you really cannot afford, and only put items on it that you can pay off in full during the grace period. Experts advise that you never have more on your credit card than 30% of the total credit line.

The easiest way to prevent this is to figure how much you can afford to pay on your balance from your budget and only charge that much on your card.

Don’t Close Your Card

Don’t switch cards when a new one comes along with what sounds like a great deal.

When you close an account, you lower your credit score. It’s better to do your research and make sure you have a card you really like and stick with it.

Things to Remember

Avoid choosing a card that has an annual fee; those fees are just wasted money.

Try not to get cash advances with your credit card because they usually carry a higher interest rate.

Always make sure you pay your minimum payment on time. Late fees can add up and eventually ruin your credit rating if you are more than 30 days late. Pay on your card even if you can’t pay the entire balance. However, you should try to pay more than just the minimum amount.

Perhaps the most important thing to remember about credit cards and avoiding debt while you are in college is not to be swayed by the idea of extra money.

Just as a business owner wants to make sure he or she has the right payroll outsourcing system in place, those attending college should use those four years (or whatever time is required to get a degree) as a pre-cursor to running a sound financial life as they enter the business world and eventually think about planning for retirement.

Remember, credit is really just money that has to be paid back and if you pay interest, you increase the cost of whatever items you buy with your card.

That makes your good deal not such a good deal after all.

About the Author: Joyce Morse is an author who writes on a variety of topics, including SEO and finances.