Flashback 20 years to any given college campus: Credit card representatives made homes on Campus Drive. Due to loose banking regulations, representatives handed out free credit cards to students, marketing them as “free money.” Students had no banking history or any sort of fiscal responsibility, so they gladly accepted these magic cards.
Bad idea. Soon enough, students got bills in the mail and quickly fell into debt along with developing poor credit. If you find yourself in possession of one of these “magic cards,” be sure to know the following.
Credit Cards Are Necessary
Despite the dangers credit cards hold, developing good credit is necessary for a college student. The majority of Americans will have to take out a loan from a bank at some point in their lives, whether it’s for a mortgage or grad school tuition. Loans are granted based on good credit history, which you get from paying off your credit card bills in full and on time. So as sad as it is to see your checking account deplete, bite the bullet and pay off that card.
Credit Cards Are Easy To Use
People assume that using credits cards is as difficult as particle physics, and as dangerous as drinking beer before liquor. That’s just not true. Using credit cards the proper way simply requires a plan and some common sense. Pay for necessary items like books or supplies with a credit card, then pay off the bill immediately.
But when you go to the bars, leave the credit card at home so the next round of shots for your squad isn’t on you.
Credit Cards Have Limits
Credit cards don’t have an endless abyss of free money that you can keep going to for your shopping addiction. Credit card companies decide your limits for you based on your credit history. That means as teenagers getting credit cards for the first time, your credit limit will be relatively low. Be smart about how often you use your card every month, because one too many shopping sprees could result in a maxed out card.
Credit Card Debt Digs Deep
Think missing one payment is no big deal? Think again. Late payments on credit cards aren’t as easy as late rent payments to your alcoholic landlord. Banks hit you with late fees almost immediately. That, combined with the current interest rate your bank has on your card can lead to you paying significantly more than your original bill.
Credit Card Debt Hurts Everyone, Not Just Yourself
Say you find yourself in debt, but can’t figure out why your late charges and interest is so high. The debt you grow decreases the amount of loanable funds a bank has to offer to its creditors. That means, every time you don’t pay off your debt, the other members of your bank are less likely to acquire a loan for their house or education. The effects of your actions with your bank extend far beyond your own transactions, so remember that the next time you think it’s a great idea to buy a hot tub for your dorm room.
Credit cards are a necessary risk people must take, though the consequences are not hard to avoid. Make a plan for your credit card usage, talk to the financial advisors at your local bank and use common sense to avoid the doldrums of the credit card.
