Credit Cards Teaching Students a Costly Lesson

Credit cards are not always as helpful as students expect. College students who are obtaining their first credit cards have found that the debts can grow quickly and often get out of control. By the time students will graduate, many will end up turning to credit card debt help to manage the unexpected situation of high debt. Understanding the downsides of credit cards can make it easier for students to avoid making some expensive mistakes relating to credit cards.

Interest Charges:

Credit cards often have a high interest rate. This is particularly true of student credit cards because college students rarely have well-established credit histories. This means that they are considered a high risk group.

Due to the high interest rates, students can find that the debt builds up and payments never seem to put a dent in the debt because most of the monthly payments are interest charges. This means the debt is building even when students are not necessarily making purchases.

High Fees:

Another downside of credit cards that students do not always expect is the high penalties they might face. Late fees, over-limit charges and other miscellaneous costs add up quickly. Students who are new to credit cards can find that the charges for getting behind or accidentally going over the limit add up quickly and often make the debt difficult to manage. This cost is very high for many students who might only have minimum wage jobs while working through college.

Time to Repay:

Making the minimum payment on credit cards can result in paying for several years before the card is paid off, even when it is not used. Since most of the payment will go to interest and any other added charges before touching the principle, students can find that they are paying on the same card for well over ten years before the debt is fully repaid. The time it takes to repay the card can sometimes cause students to pay for the same card well into their 40s if only minimum payments are made each month.

Students across the country are learning a difficult lesson about the negative side of credit cards. The high interest coupled with expensive fees and added charges often results in paying more than students can afford to manage the debts. Even the most responsible students can find that credit cards are a costly debt that is difficult to manage without help.

Preventing and Handling Credit Card Debt

Credit cards can seem like a great way to purchase an item that you want right now if you don't have the necessary liquid cash on hand. They can also help you out in an emergency situation. However, it doesn't take too many impulsive purchases or emergency situations before you find yourself in serious credit card debt. Credit care companies often market to students and other young people, increasing the probability that a young person who lacks personal finance knowledge will wind up in serious debt before landing her first real job or finishing a college degree. Taking proactive steps to avoid accumulating debt associated with credit cards can provide you with a sense of financial security and confidence. Follow these steps to avoid accumulating debt.

Stick to a Budget

Whether you are a college student, a single mom or a professional, your first step to financial independence is to create a budget. Make a list of all of your expenses and a list of your income. Include expenses for entertainment and gifts. Add an emergency expense in case your vehicle needs repairs or you have a medical problem. Do not exceed any line of your budget. If you do not have the cash on hand to pay for something, you likely cannot afford it.

Save Money

Although it can be difficult, it is crucial to start saving money. As long as you do not have savings available for unexpected expenses, you are susceptible to getting in credit card debt . Save as much as you can each week and eventually you will accumulate a sizable sum to protect you in times of financial difficulty.

Compare Cards

Before committing to a particular card, compare your credit card offers with each other. Avoid cards that charge an annual fee as this is an additional and unnecessary expense. Check for the lowest average interest rate, not just the lowest introductory rate. Having a lower interest rate can help you mitigate the amount of debt you accumulate.

Be Careful with What You Charge

If you have acquired a credit card, be sure that you do not charge more than you can afford to pay off within the month. Leave your cards at home if you are afraid that you will be a victim of wasteful spending.

Credit cards can help you establish credit, but it is important that you avoid accumulating debt at all costs.