Responsible Credit Card Use in College Students | CreditShout

Responsible Credit Card Use in College Students

By Kevin / May 12, 2009
encourage college students to use credit cards responsibly

Sallie Mae, the largest provider of student loans in the nation, recently completed a study looking at the spending trends for college students with credit cards. The study found that students last year used credit more than ever before, on average charging about $2,200 in direct educational expenses like tuition.

This dangerous trend in increased credit card spending with college students is reaching epidemic proportions. Students often pile thousands of dollars onto credit cards, assuming that once they get a job in their chosen career the debt will be easy to pay off. The truth is, high interest rates, combined with lower-than-expected salaries, higher-than-expected costs of living and student loan repayments, create an overwhelming problem that only gets worse.

Students are also finding that they’re leaving college not only in debt but with a poor credit history from bad money management and credit card use. This follows them for years, making it hard to get new loans, acquire a mortgage, get a car loan, or even get a career.

What’s the first step to preventing this problem?

This huge problem needs to be dealt with before it begins. Ideally, parents need to talk to their children before they leave home and get credit of their own. Parents that teach their children responsible credit use, along with good money management, send their children off prepared to handle their own finances. Mastercard, Visa and American Express have websites that are designed to teach college students important information about credit use.

Mastercard’s Learning Center

Budgeting is a skill college students should learn early to avoid credit card debt and teach them how to manage their money. Begin by creating a monthly budget for yourself. Use figures that are realistic and actually portray your expenses. Compare past month’s spending and carefully decide where your money should go. Set aside enough each month to cover all anticipated credit card charges. If you’re already in credit card debt, set aside no more than 10% of your net income each month to pay off the debt. For example, if you make $1,000 net each month, set aside $100 for debt repayment.

College students struggling to acquire good money management skills would do well to remember a few things. First, never spend up to your credit limit. Spend only what you can afford to pay off at the end of the month. Credit cards aren’t free money; they’re more like a short-term loan.

Keep in mind that it would take you almost 12 years to pay off a $1,000 debt with an 18% interest rate, costing you over $1,100 in interest, assuming you paid only the minimum due each month. Keeping this reality in mind, try to use credit cards only for emergencies or for purchases you will pay off that month. Carrying a large balance will sink you into a hole that is hard to get out from.

The good news is that credit cards can be convenient and helpful, helping you establish good credit throughout your life if used responsibly.

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