College Student Credit Card Debt
By Sherril Steele-Carlin
If you're like most college students, you're deluged with tempting offers to open up a credit card account and enjoy all the benefits a credit card can offer. Unfortunately, recent studies have shown that more than 78 percent of college students now have credit cards, and those cards carry an average balance of $3,000, meaning college students leave school with more than an education and student loans to repay.
Credit cards can be convenient, but used unwisely, they can create all kinds of credit hassles, and even ruin your future credit when you're ready to make a big purchase, like a car or home.
Building Your Credit
Many students feel credit cards can help them build their credit, and that is true, but that credit can come at too high a cost for many to handle. Yes, paying regularly on a credit card balance will help you establish good credit, but the temptation with credit cards is to spend more than you can afford. As the balance on the card increases, so do the payments, and some students forget this. Credit cards are easy to get on just about any college campus, but they are much harder to use responsibly.
Credit cards are also not the only way to build up a good credit rating. Maintaining a bank account or savings account also helps establish good credit, and car loans also help establish and maintain credit when they are paid back on time. It's when you can't make the payments that your credit is negatively affected.
Negative Credit Reports
If you can't make the payments, you lose more than your credit card. You also lose your good credit rating, and that can come back to haunt you after you leave school. If your credit report shows a credit card that was not paid back successfully, you could find yourself high and dry when you want to buy a house or a car. A negative credit report rating may not sound like a big deal now, and it might seem simple to just not pay back the card, but later on in life, your credit report really matters, and what you misuse now could hurt you in the future.
Work With Creditors
If you find you cannot maintain the monthly payments on your card, STOP using it! Call your creditor and explain the situation to them - some creditors will work with you to reduce your payments. Contact a credit counselor and talk to them about your options. There are also many debt reduction companies who specialize in helping you reorganize and reduce your debt. However, most of these companies, even though they say they are "non-profit," will charge you a hefty fee for their services, so be aware before you sign up with one to reduce your debt.
Credit cards are so prevalent in our society, they don't seem very ominous, but they can ruin your credit and your life if you use them irrationally. If you feel you must have a credit card in college, get one with a low interest rate, a low line of credit, and make sure to use it responsibly.