Students Beware - Don’t Fail With Credit Cards

All that being said, credit cards are just too easy to get. Every single student has access to the Internet, and you can apply online and get instant approval for credit. The problem is, at payment time when that student still has an empty or nearly-empty bank account, what are they likely to pay on that credit card bill? The minimum payment, of course. But credit card companies have learned that college students are an excellent risk, because not only are they more likely to have a decedent job lined up before they even graduate, but also their parents or sponsors are likely to help with debts they run up while in school, without many questions asked typically, because they want students to focus on their studies rather than concerning themselves with unpaid bills. Next thing you know, your debt piles up faster than dirty clothes in a dorm room.

Then that student hears of an amazing solution called a “balance transfer.” It sounds like a way out. Just get a second, third or fourth credit card with that introductory zero percent interest rate and transfer your debt balance. Not only then do they not have a payment due for a month, but they now have a completely empty credit card available to them that they have transferred their whole balance from, ready for fresh charges!

Never fear: you simply do it again. And again. What they probably aren’t teaching you in your Introduction to Business or Economics 101 classes is that this is just shuffling debt, and prolonging the inevitable crash. If you aren’t good at managing credit card use, or worse you think you can have instant popularity by supplying pizza to every single person in your dorm, the last thing you need is a wallet full of cards. In no time, your so-called debt management strategy of multiple credit cards explodes into more debt than you can possibly afford.

Another frequent misuse of credit cards is the cash advance. Remember when you begged for money from your parents hoping that they wouldn’t check out your sob story? The cash advance is an electronic handout, with no questions and no lectures. Just insert your credit card and out comes the cash. Since ATMs are located everywhere you want to go, it’s easy to get money. Instead of leaving the party when your cash runs out, just find an ATM and get more cash.

The cash advance is the most convenient and the most devastating feature of student credit cards. If you’re in a pinch and really need cash, it’s a great option. More often than not, however, the difference between what a student wants and what a student needs is hopelessly blurred with the presence of a credit card with an ATM logo.

That electronic money machine is basically giving you a loan at high rates of interest. On a typical Saturday, you can hit the ATM to cover $10 for lunch, $55 for a fantastic jacket that’s on sale and another $35 to pay the Chinese food delivery guy. That’s $100 from cash advances in just one day. If you do that once a week, you pile up $400 in debt on your credit card in a typical month. On some cards, cash advances are subject to a higher interest rate - so the debt quickly becomes overwhelming.

Did you ever notice that as the school year drags on, your friends tend to get low on money? This is especially true if they have noticed you paying for anything at all with a credit card. If you could just pay for the next round, they’ll pay you back after the next paycheck. So you put it on your credit card and wait to get repaid. Meanwhile, your monthly credit card bill is due and the company doesn’t care that your deadbeat friends haven’t repaid you yet. The balance due is in your name and it is your problem.

Credit card mistakes are neither forgiven nor forgotten. Late payments, charging over your limit and shuffling money around cards to pay what you really can’t afford buys you nothing more than a low credit rating that will take you years to repair. You may not care right now, but you will care when you try to buy a car, a home or another major purchase and find out your credit rating is too low for you to get approved. Think about that the next time a group says, “Hey, can you just charge this round until I get my paycheck?”