It seems that many students pick up a credit card application or two when they receive their college application. Many credit card companies give away free t-shirts and other handouts if students gives his or her personal information, which a credit card company will use to issue a credit card.
The Education Resources Institution and the Institution for Higher Education Policy wrote, “Thirty-seven percent of students with credit cards got their first cards by responding to a mailing. Fifty-five percent obtained their credit cards during their first year of college.”
Overwhelmed with the prospect of money on standby, many students fail to comprehend the real financial trouble credit card debt can bring, and many plummet into credit card debt.
Robert Trujillo, a Palo Alto College sophomore, said, “My credit cards are a hassle. I’ll make the minimum payment until I graduate and get into the work force.”
Unfortunately many students make purchases or accumulate debt with no real plan of how to get out of debt.
Brian, another Palo Alto College sophomore, said, “A lot of students take credit card debt like they would college classes or exams; it’s just another part of college life.”
In an article entitled, “Scary Debt Stats,” the MotleyFool.com website said that total finance charges Americans paid in 2001 was $50 billion. In the same, year total consumer debt was $1.7 trillion.
In an article by Bob Herbert of the New York Times entitled “Living on Borrowed Money,” he cited Democratic presidential candidate John Edwards, who said, “Credit card companies target people least able to pay and then raise interest rates when people miss a single payment after losing their job.” Edwards continued, “Struggling families that fall behind in their payments are like a gold mine to the credit card companies.”
With this information in mind and the holiday season upon us, students should watch their expenses carefully. Students should approach the season with 5 key goals. These goals are: 1.) Cash before credit; 2.) Self-control; 3.) Plan before purchase; 4.) Early payoff; 5.) And finally, no interest. These goals will result in a positive credit history, as well as responsible debt.
Simple planning, such as treating credit card purchases as checking account purchases, subtracting the credit purchase out of your checking account to pay the purchase off at the end of the month, is an easy way to avoid irresponsible debt. Comparison shopping may be time consuming, but it can save you money and financial disaster. Applying for a secured credit card based upon the amount of money in your savings account is also a responsible way to get through future holiday sprees.
Failure to follow these goals could lead to the accumulation of irresponsible debt, which also could be defined by a lack of self-control, late payments, paying high interest and living beyond your means.
“Late fees have become the fastest growing source of revenue for the industry, jumping from $1.7 billion in 1996 to $7.3 billion in 2002,” said Senator Edwards.
When students enter a financial contract with any lender, whether a credit card company or otherwise, the student carries an individual responsibility of commitment to pay back any money borrowed, as well as any finance charges acquired during this process.
A student charging $1,000 during the holiday season and never charging again, then making the minimum monthly payment until the charge is paid, will pay $3,000 (the original $1,000 plus $2,000 in interest) over a 20-year span.
During the hustle of the holiday season, many students overlook the possibility of not charging and simply making gifts from the heart, which are often less costly and have a more meaningful effect.
A simple craft, baked goods, or a card with some personal words or an IOU for babysitting or a car wash allow both the giver and the receiver to feel the joy of the holiday spirit. But most importantly, they leave credit card purchases at a minimum, which could be the best post-holiday gift ever.