In recent years there has been a lot of action when it comes to credit cards and college students. In the Credit Card Act of 2009 a college student’s ability to receive a credit card became more difficult. Before this act it was not uncommon to find credit card companies soliciting on college campuses and as soon as some reached 18 their mailbox became flooded with credit card applications that were accompanied by very high interest rates. The law now states that credit card companies must remain 1,000 feet from a college campus and that anyone under the age of 21 must have a cosigner to receive a credit card. These laws have been created not to make our lives more difficult, but to keep us from the ensuing debt that can occur when a young person has access to a credit card.
Although credit cards can create many problems for young individuals, they also provide a wide range of benefits. One of the major benefits of using a credit card is that it helps to build your credit and credit score. Your credit and credit score is what helps figure the interest rate you will be charged and determines your ability to receive loans in the future. Having no credit can sometimes be as bad as having poor credit.
One way to build credit, but still keep yourself from increasing debt is to choose one thing that you purchase each month and use a credit card to pay only for that item. Some examples would be gasoline, prescriptions, or a cell phone bill. These three are good options because they will remain similar from month to month so you will become more familiar with the charge. After putting one of these purchases on your credit card you can pay it off at the end of the month. If you treat your credit card bill like another bill that you might be paying it will allow you to use the card to build credit and your credit score, but to not pay interest on your purchases.
Lastly, credit cards can really be a benefit when we use them correctly. If you find yourself in a situation where you are not be able to pay the card off in full every month, make sure that you are able to pay more than the minimum payment. To avoid overspending with your credit card, use your card for needs only instead of a means to fund your wants. Paying the minimum payment only will rack up the interest costs that you will pay and remove any benefit that the credit card can offer. Enjoy the convenience of having a credit card, but don’t think of it as free money!
Anna Ewing Peer Counselor I Powercat Financial Counseling www.k-state.edu/pfc