Fact number one. There aren't many college students living on their parents money. Many people believe that students are getting a free ride. That they have parents who planned. For some, that is true. But for many the monster of student credit card debt looks them in the face every day. This debt is rising annually because for many it is their only option for college. Instead of studying after class many students have to go to work to take care of the bills that the student loans won't cover. Most college students definately don't get a free ride!
Student credit card debt is'nt always accumulated from irresponsible partying and recreation. Most of it comes from a need for survival at school. All of the expenses that a student has from food to housing and books and supplies can end up being a mountain of credit card debt. The beginning of the debt spiral is almost a necessity for some students just to make it through school with the materials that they need. Without student credit card debt, they wouldn't be able to complete their education.
Staying Focused On Your Education
Parties are great. But students need to make sure they can supply themselves with the necessities for school. Its necessesary to prioritize and get things in order. It's never easy to pay off your student credit card debt, and sometimes things can spiral to the point that you're so overwhelmed that you don't want to even deal with it. But remember, parties are not a necessity. They may sometimes feel like a necessity, but they can also leave you burdoned with debt before you even have a chance to get a job and enter the workforce. Try not to get in debt over the "Animal House" culture. Keep your priorities in order.
The interest rate on student credit card debt is probably going to be high. Due to the age and lack of credit history of most college students the rates are very poor. Because college students have limited income they are prone to missing or being late on the occasional payment. Because of this they do represent a higher risk and credit card companies will raise the rates to exorbitant levels for late paments. You need to make sure that you keep up with the payments, and don't incur the debt if your not absolutely sure you can keep up with your payments.
Lastly, its important to understand that it can take years to pay of your student credit card debt! Make sure that you put yourself on a debt repayment plan immediately when you get a secure job. Try not to let your credit card balance go over 50% of whats available. In other words if you have a card with a $5000 limit, think of it as a $2500 dollar card. Interest rates are sometimes calculated as a ratio of your balance to your limit and at 50% you become a higher risk, so many times you will get your rate jacked up.
While credit cards may be a sad fact of student life, the debt continues long after schools out. Watch your finances and don't start your life with excessive student credit card debt.
Many professionals in the financial industry warn against the dangers of student credit card use. They fear that young people will let their credit card use run out of control. Instead of fearing that young people will fail, try educating them about credit card use. After all, the benefits of getting a credit card while young far outweigh the risks.
The Risks Involved
Many young people have the perception that using a credit card is the same as paying with their bank debit card. They do not consider the extra fees or the risk of building debt. These people think that they can just go ahead and use their credit card for any purchases that they cannot afford at the time. This type of thinking can lead to a huge credit card balance. With young people, this can be particularly dangerous, as they do not have the income to pay off the balance. Credit cards allow young people to dig a financial hole that they do not have the resources to climb out of.
As their credit card debt builds, young people often don't recognize the problem until it is too late. Eventually their debt gets to the point that the minimum monthly payment only pays off the interest charges. Instead of seeking help with their debt, many young people ignore the problem and, worse yet, they even try to get a second credit card to build more debt. As these young people are trying to prove their independence to their parents, they are often too embarrassed to ask for help. It can lead to a feeling of helplessness.
Education is the Key
The root of the problem is that young people are never taught how to responsibly use credit cards. The school system chooses not to teach such life skills as money management or credit card use. This leaves the responsibility solely in the hands of the parents. Unfortunately many parents are starting to lose touch with their children just when credit education is most necessary. There are also some parents who do not know about responsible credit card use themselves.
Young people need to know how to use a credit card responsibly and how to avoid credit card debt. They need to know to only use their credit card for as much as they can reasonably pay off each month. They need to know all about credit card interest charges too. Without credit education, it is far too easy to make mistakes with your credit card.
The Benefits of Getting a Credit Card Younger
Sure there is the convenience factor of having a credit card when you are just out of high school. More importantly, a credit card helps build credit over time. The earlier you start building credit, the easier it will be to make large purchases in the future. Anytime you need a loan from the bank, the bank will look at your credit history. The longer you've built credit, the easier it is to get a loan. Plus you will pay lower interest rates. Without built up credit, you might even get declined for that loan.
Credit cards also give young people the independence that they need. Who wants to phone their parents each time they want to order something online? What about when you sign up for a video rental account or when you register for phone service? A credit card is a must. A credit card can even act as a financial safety net in tough times.
Conclusion
So unless young people get educated about credit card use, there is a good chance that they will have to learn by making mistakes. Help protect their future by giving them the tools to succeed today.
Both Ted Batron & Jeremy Biberdorf are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Ted Batron has sinced written about articles on various topics from Anger Control, Debt Management Counseling and Finances. Ted Batron is a financial professional who specializes in debt counseling and custom debt elimination plans. The eCourse He developed is a good place to start for people who want to learn how to negotiate, eliminate and settle credit card debt at a 30-70. Ted Batron's top article generates over 27100 views. to your Favourites.
Jeremy Biberdorf has sinced written about articles on various topics from Camping, Credit Cards and Bank of America. now to start building credit. Parents can also save money with a. Jeremy Biberdorf's top article generates over 14800 views. to your Favourites.