For many freshmen, having a credit card means convenient and hassle-free purchases and payments. With plastic, most college students think that they can avoid bringing cash with them.
However, recent studies have shown that most students with credit cards are living beyond their means and incurring huge debts. At present, 84 percent of undergraduates have credit cards compare to 76 percent in 2004.
A recently conducted survey found out that 30 percent of college students use credit cards to pay for tuition. Ninety-two percent, on the other hand, use credit cards to buy education resources like books and supplies.
While convenient, plastic also gives cardholders the freedom and the temptation to use their cards for more lavish purchases. In fact, most Americans finish college raking in more than $4,000 dollars in credit card debts.
According to Brenda Noblitt, the assistant director of Student Financial Aid, using plastic can lead to uncontrolled expenses. She stresses that credit card debts can quickly pile up if an undergraduate is not aware of the high interest charges, and monthly payments.
She warns that impulse buying can trigger late payments and mounting debts for college students. Delayed payments will also lead to higher interest charges and consequently, larger debts.
Paying off a $1,000 balance using the monthly minimum amount can take up to five years. Most card companies also pile on substantial fees, penalties, and charges when undergraduates fail to settle their monthly dues. This can further increase debts.
To avoid incurring large debts, undergraduates can make use of other payment options like debit and charge cards. These particular cards are often considered as safer alternatives to conventional credit cards.
According to experts, debit cards require a bank deposit to act as collateral. The card's credit limit is equal only to the amount of money in the deposit. In the event that a college student fails to pay the monthly minimum, the payment will be deducted from the bank deposit. In effect, only real money will be spent, leaving the cardholder debt-free.
A charge card, on the other hand, works similarly to an ordinary credit card. However, this particular card type is best used as an emergency payment option. Charge cards also require students to pay the full amount every month instead of the minimum.
For undergraduates who insist on using plastic, experts say that they can avoid large debts by simply keeping a single card, reading the fine print, having a stricter budget, and tracking purchases each month.
Any of these suggestions can help college students avoid financial problems in the future.