Student Credit Card Debt: A Survival Guide For Students
College may be the last care free step before real life starts
, or at least it should be. Students will be able to go to sleep each night with the just pressing responsibility being the English exam tomorrow early morning. They should still get to live in a global where although they can't afford much more compared to occasional late night drive through Taco Bell or downloading the most recent hit single, at least they aren't worrying yet about paying a home loan, most forms of insurance, utility bills, or the college loan that is letting them get an education.
Unfortunately, for many college students this isn't the case. Many are already burdened with financial pressure since they're accruing credit card debt, in some cases more than $7, 000 worth of it. Increasingly, students are even coming to campus with credit debt in hand. Consolidated Credit Counseling Services Inc. reports that 20% of freshman got their charge card in high school and nearly 40% subscribe to one in their first year at college. Using the abundance of on-campus, mail and Internet card provides giving low introductory rates, freebies, and bonus air travel miles, it's not surprising to find that according to some 2001 Nellie Mae study 83% of all undergraduate students have a minumum of one credit card and carry an average balance associated with $2, 327.
The problem of high credit card debt has many implications for any student. Some end up dropping out of college all together to allow them to work full-time just to pay credit card expenses. If they are able to stay in college, but have in the process ruined their credit score, it can affect their ability to rent a condo, afford insurance and even get the job that will assist them to pay off their debt. Even relationships suffer due to financial stress. There is also a psychological impact on students. The stress can lead students in to depression, and in a few cases has already been a contributing factor to suicide.
Of course it hasn't been like this. According to Dr. Robert D. Manning, Professor at Rochester Institute of Technology and author of Charge card Nation, in the late 1980s student credit card limits were around $300-$500 and parents were necessary to co-sign. But when credit card companies began making lots of money during the 1991 economic recession, they started searching for new markets and found it in the college student population. Issuers dropped the co-signing requirement and began raising limits, which, when combined with parents' growing financial pressures and higher costs of education, gave students a method to fund themselves through college.
And students are a simple market to tap into. In his article "Credit Credit cards on Campus, " Manning writes, "Credit card businesses encourage fantasies of easy money because students tend to be so profitable: teens have financial naivet, high materials expectations, and responsiveness to relatively low-cost marketing strategies, high potential earnings, and future demand for monetary services. "
Credit companies advertising to the vulnerabilities of young students isn't the only factor that goes into the present trend. Most students simply have not received the training in personal finances and credit card management that they must meet the onslaught of offers. According to Combined Credit Counseling Services, Inc only 15% of students take a personal finance class. And, according towards the Jump$tart Coalition for Personal Financial Literacy, a non-profit organization which promotes financial literacy in the K-12 level, parents for a variety of reasons are not speaking with their children about the privilege and responsibility that goes along with using credit cards.
Dr. Carol Carolan, Executive Director and Founder from the Center for Student Credit Card Education, says that the single best thing parents can perform to help their children avoid the pitfalls of credit debt is educate them. Parents need to talk for their children about it early on and regularly. Doctor. Carolan suggests the following tips for parents.
Whenever a child has reached an appropriate level of maturity and knowledge of personal finances, co-signing a credit card can end up being very beneficial.
Get a credit card with a minimal limit and no annual fees (visit the "Card Reports" portion of our website to comparison shop for student charge cards).
Discuss with your child the details from the credit card including interest rate on purchases and payday loans.
Review all the expenses every month.
Show your son or daughter what finance charges might apply if the balance isn't paid in full and on time. This consists of any interest, fees, and penalties.
Be a great role model.
Experts don't all agree on the right age for a first credit card. Dr. Manning, for example, argues in his article Credit Cards on Campus that having them at a youthful age may actually result in fewer debt problems afterwards. " Other experts argue that waiting until the junior or senior year in college is better. The bottom line parents need to realize is that once students reach the school campus, they will be inundated with credit card offers and can get a card regardless if they are backed financially solely by their parents.
And talking with students involves a lot more than mere calculations of fees, interest rates, and amounts. Students need to understand the messages they obtain through advertising, the difference between a want along with a need, as well as the lure of cash. Give students a healthy, realistic perspective of money and material possessions and they'll be better equipped to make wise decisions.
Universities and colleges play a huge role in the present trend of high student credit card debt. Some invite charge card issuers onto campus because they receive revenue too. But others are starting to recognize the problem and are restricting the activities of credit card issuers on campuses. Manning states in his book Charge card Nation, that "During the academic year 1999-2000, over 400 universites and colleges formulated official policies against on-campus credit card marketing and nearly 600 other schools are looking at similar restrictions. "
Some institutions like Rochester Institute of Technology (RIT) and also the University of Central (UCA) Arkansas are even starting to require classes in personal and consumer finances. Jane Ann Campbell, CFP, professor of personal finance from UCA and professional speaker with Money Magic, Inc., includes a mission to educate students, educators, and adults regarding money. She is currently working on her dissertation about college students and credit debt. Campbell is researching the best methods of reaching university students through a high impact presentation warning them from the perils and privileges of plastic. Like other specialists, Campbell is not against students having credit credit cards. In fact, she says it is easier to obtain one as a student and can help them build the great credit history needed after graduation. But students do have to be educated. Campbell gives the following tips and memory joggers for students.
There is true magic to compound interest when it's on your side (as in an investment or savings accounts), but true devastation when it's working against you (as in credit debt). Even when you buy something on purchase, the interest alone can double the price.
Take into account everything. Keep records of each credit card such as the interest rates, fees, balances, due dates and buys. Campbell suggests a good way to do this really is to setup a spreadsheet in Excel. This will even keep you organized so you don't miss an additional payment.
The only way to get out of debt would be to stop charging and always pay more than the actual minimum. If more than one credit card comes with an outstanding balance, then begin paying off the one using the highest interest rate first, then go to the following highest interest card, and so on.
If within trouble, talk about it with someone you believe in and respect. This could be a parent, instructor, or friend. Hiding it doesn't make it disappear.
Credit scores can make all the difference on the planet for good or bad. It can take several years to recover from a bad credit score.
Understanding how to use credit cards responsibly is a gift. Seek to achieve knowledge and wisdom. Credit is a privilege which is the student's personal responsibility not to let it be a peril. Campbell says, "The magic comes from a person. "
While in college, students need to think away from box, but live financially within the box.
Credit cards is definitely an invaluable tool for a student. While providing protection and convenience, if used wisely a student will build the good credit rating that is required to secure other consumer loans, jobs, and lower insurance costs after graduation. Dwayne Blew, a member of CreditBoards, a forum focused on credit issues, is one example of a student who did not buy things he didn't need and paid his charge card balance in full each month during college. Now he is reaping the advantages of a good credit score. Dwayne says, "One of the reasons you are going to college is to improve your lifestyle once a person graduate. After putting so much effort into college, why let something small like a credit card wind up ruining it all? "
Many excellent resources exist to help students both avoid and get free from the credit card debt trap.
Comparing credit cards is an important step in finding the best one to meet your requirements. CardRatings.com makes this search simple and easy by allowing you to research the best rated student credit cards.
Consider utilizing the services of a charitable credit counseling service. Be very careful when thinking about a credit counseling service, though, as many guidance services are scams, including nonprofit services.
Consolidated Credit score Counseling Services, Inc. has a free, downloadable Cost management Guide for students.
Dr. Carolan has written a booklet titled The ABCs of Charge card Finance - Essential Facts for Students that may be ordered online and it will be mailed to individuals totally free.
Message boards or forums are a great supply of information. You can post questions, concerns, or comments along with a real person will respond with real life info. Campbell says they are a gift and may even become a support group. You can join the actual CardRatings.com Message Board for free.
Even if your school doesn't require an individual finance class, take one if it's offered.
by: InfoBlogs4U
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