Credit cards could likely pose the number one "debt threat"
to college students today. According to a 2008 survey conducted
by Sallie Mae, 84 percent of undergraduates have
at least one credit card and the average debt is $3,173.
This type of debt can follow you for years and limit your-and your family's-future.
If you must have a credit card, follow these steps to keep its use under control:
- Have only one major credit card. Multiple cards mean
multiple chances of landing in debt. Also, it's cheaper in
the long run to pay a larger amount on one card than to
make minimum payments on many.
- Keep your credit limit low, preferably around $1,000.
This will ensure you can't fall into debt too deeply. If the
credit card company automatically raises your limit, call
and have it reduced again.
- Force yourself to read your statement. Make certain the
charges are accurate and pay attention to the information
about how long it will take to pay off the debt if you only
make the minimum payment.
- Shop around for a card that has no annual fee and a
lower interest rate. You can shop for the best credit card
deals on the Internet. Try the Bank Rate Monitor's site at
www.bankrate.com. If you belong to a credit union, find
out what they offer. Credit unions often charge lower rates
on their credit cards.
- Use the card only for emergencies. (Emergencies don't
include clothing or eating out.)
- Make your payments on time. Even with credit card
reform, if you're late with a payment, you'll face a hefty
late payment fee-often around $35-and the credit card
company may raise the interest rate you pay.
- To avoid interest rate charges, pay off the entire balance each month.
- Avoid getting a "cash advance" on the card. The interest
rates for cash advances often are huge and the credit
card company will begin charging interest immediately.
- On every credit card purchase, remind yourself that you
are taking out a loan. Ask yourself, "Would I really go to
the bank and take out a loan to do this?"