Monday Tips: Credit Cards & Thinking about the Future

You've undoubtedly heard this story before: student heads off to college, is bombarded by credit card offers, and falls into the habit of buying expensive items with money they don't have. The temptation to use credit cards is particularly strong in college because students rely on the income they believe they will earn after graduation and put off payments month after month. What many do not not realize is that credit cards come with hefty price tags: interest, fees, and damage to your credit score. Putting off a small amount of credit card debt can cause the amount you owe to blossom out of control.

Credit cards are quite useful when handled properly. They provide a financial cushion in case of an emergency, allow students to begin to build good credit, and provide protection for purchases. Savvy Student has some tips to help you get the most out of your credit card and avoid accumulating debt before you graduate.

1. Understand that credit cards are not free.
   
   • Credit cards have "finance charges" associated with them. These are interest rates that may vary during the time you own the card. Click here to see how the purchases you charge to your card can result in large amounts of interest.
   • Some companies will charge you an annual fee just for owning the card. These fees can be anywhere from $20 to $100. These fees are also subject to interest, so it is important to be aware of them as they are applied.
   • Paying even one day late can result in a higher interest rate or a fee.
2. Do not rely on your "future projected earnings."
   
   • College degrees often mean higher paying jobs, but in the current economic climate, it is not wise to depend on what you believe you will be making later in life when using your credit card. First, you can never be entirely sure that you'll find employment right after graduating. Second, the longer you wait to pay off your credit card balance, the more money you'll end up paying the credit card companies in the long run. A good rule of thumb is to only charge what you can afford to pay in cash and pay more than the minimum payment every month on time. Pay the full balance whenever you can and you'll be on your way to excellent credit.
3. Keep in mind that your credit history will follow you.
• Credit checks are fairly common in both employment procedures and rental applications. Poor credit can result in lost job opportunities, less choices for housing, as well as difficulty getting loans or a mortgage later down the line.

Each of these tips stress the importance of both planning for the future and being aware of your current economic position. It is always wiser to plan and save for the future than it is to depend on possible future income.

Let us know if you have any questions, comments, or stories to share with us by commenting on this post or sending us as email as sfs@brandeis.edu.

Stay savvy Brandeis,

Savvy Student