Home > Credit Cards > Credit Cards Can Be Detrimental to Students' Financial Future
Credit Cards Can Be Detrimental to Students' Financial Future |
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Seventy-eight percent of undergraduate students nationwide have a credit history and have credit cards while they are in college. According to a survey, these students have an average credit card debt of $2,748. For instance: Angelina Dixon is close to fitting into that category. All of her three major credit cards are close to the limit. Even though Dixon's parents help her out sometimes financially and she received a scholarship to come to university, the freshman applied for two of the credit cards since she has been at college. "I think I will have the money, and then I have to turn in the bills," said Dixon. Debt on credit cards is one major financial problem students obtain during their time at college, especially during the holidays. But students have different expenses that can add up and complicate their financial situation, particularly at a time when going to school itself is at an all-time high. Credit cards can be beneficial or detrimental in budgeting expenses during your college career. To meet your educational, social, and personal needs, exploring the option of using a credit card may be beneficial when expenses cost more than your bank account balance. Here are some positive and negative effects of using credit cards. Some positive effects to using credit cards are that they: Credit cards allow you to establish a good credit history, aid in the convenience of paying for unforeseen emergencies, record your purchases, give you an instant loan, offer security from theft, and paid for in full each month, they are an interest free loan. And some negative effects to using credit cards are that they invite impulsive buying, trap you in debt with high interest rate and high annual fees, leave room for an addictive lack of budgeting behavior, and they distort the concept of spending someone else's money. Therefore, when government loans and scholarships aren't enough, students turn to credit cards as an alternate source of spending power. But this can prove just as detrimental if not handled properly. Part of the problem is that credit card companies see college students as a prime target. That is because they are most likely not going to be able to pay off their balances every month and therefore, incur interest. So these companies hawk their wares at basketball games or in the Union, they offer credit cards but students don't understand exactly what they are getting into. The average undergraduate has $2,200 in credit card debt according to the creditors. This is a result of all the charges and fees that come with a lot of the credit cards offered to students. For example, a finance charge is an interest charge, which can be as high as 20%, on the unpaid portion of your bill each month or an annual fee, where some companies charge yearly membership fees of anywhere from $20 to $100. Therefore, the longer students wait to pay the credit cards off, the worse it gets. By sticking to minimum payments it would take a student more than 12 years and $1,115 in interest to pay off a $1,000 bill on a card with an 18% annual rate. Educational material on the use of credit cards shall be included in the orientation programs for incoming students ... the issuer shall provide to students information on the responsible use of credit cards and risks of credit cards use. Perhaps college students have gotten into this mess because they have no formal education in financial matters. While 37 states have policies that encourage or require students to receive instruction in consumer education, only 14 mandate financial literacy training in high school. Essentially we are expected to learn from our parents or trial by fire. It is important to keep a few things in mind when dealing with credit cards. Read all application materials carefully, especially the fine print, to be familiar with the terms of the agreement. Also consider using debit cards instead of credit cards. Money is deducted directly from your checking account, so you can't spend more than you actually have. And last, pay bills to keep finance and other charges to a minimum!!! |
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