This is a guest post from Mr Credit Card of www.askmrcreditcard.com. Mr Credit Card reviews credit cards and today he is going to talk about things that students do not understand about credit cards. For full disclosure, Mr Credit Card uses the Plum Card from American Express as his official site business credit card.

Last week, I hung out at a friends house and his kids college friends were hanging around. We chatted a little and when they found out that I ran a credit card review site, they started asking me some questions. It was then that I realize that many students are so ignorant about simple (to me anyway) basic finance and credit card terms that I thought I would address them here.

Thinking that paying off minimum balance is good enough – Some of the college students asked me things about minimum payments. Many of them simply thought that all they had to do was to pay off their minimum payments and everything would be fine. That was their concept of using credit cards – which is to pay for something you do not have enough money for and just paying a fraction back every month. I then took out a calculator and showed them how much interest they would be paying if they just paid the bare minimum and how long it would take them to pay it back. Many of those college kids were shocked and vowed never to carry a balance again!

Having no idea of how much they are spending every month – Aside from not understanding about the concept of pay in full and carrying a balance, most of the college kids around the table did not know how much they spent. They said they kind of have an idea, but cannot pin down exactly how much they spend each month.

Not aware of rewards – Many of the college kids are not aware that credit cards have reward programs. When I explained to them what reward points were and that they could earn cash back rewards, they were shocked.

Many are not aware that proper use of credit cards can build a credit history – The college kids I talked to had no idea about building a credit history. Yes, they have probably heard about FICO scores or freecreditreport.com, but most are ignorant as to how to build a credit history and what they have to do to get a good score. They do not know what constitute a good credit score. They cannot name the three major credit bureaus.

No idea of when they will pay off their college loans – Many of them also have no idea as to how they are going to pay off their student loans. All they know is that they are stuck with a bunch of loans and that have to be repaid. I guess most are living day to day and trying not to worry too much money matters (at least for now).

Some have already gotten into credit card debt – I guess this is the saddest part of the night. Which is that some of these kids have gotten into debt on their college student credit cards. They are even asking if there low apr student credit cards to transfer a balance!

It is a sad state of affairs that most college students do not understand basic financial matters like credit cards and yet they are all using them! At times, their lack of knowledge is simply mind boggling. But on reflection, I do not blame them. After all, how many parents really teach their kids about money? How many schools actually have classes on “money” and “finance”? Hardly. So why should I be surprised at what I heard over at my friend’s place? But this incident certainly made me want to teach my kids about money!

(No Ratings Yet)

 Loading ...