Mixing college students and credit cards is not as easy as mixing eggnog with rum this holiday season. So in the midst of these tough economic times, it’s important to be credit-savvy in order to stay debt-free for the new year.
Holiday gifts may be a staple around this time of year, but there should be a line drawn between being careful and over-spending.
First off, if you are re-gifting and making homemade holiday cards, you may need a credit card in order to help out with your shopping needs. Credit card companies such as Capital One and Chase love to target college students. You may see an e-mail or two in your inbox for a credit card, or as a side ad on your Facebook profile.
These companies, along with many others, have programs designated for students who have little to no credit and are looking build credit. Capitol One, for instance, has a “young adults” credit card offered for those who have little to no credit. Chase.com also has a “student center” that offers the average, limited-credit college students credit cards with a low APR rate.
They even reward you for being responsible, like paying your balance off on time, with givebacks such as “karma points” that you can share with friends on Facebook. That’s the easy part.
The credit card companies strategically get you with the colorful zero-percent interest ad, but be aware.
Earlier this semester, Rochelle Popp, coordinator of the Treasure Coast campus’ Wellness Program, and Stephen Johnson, a representative from IBM Southeastern Employee’s Federal Credit Union, organized two workshops providing tips for how to read the fine print when it comes to credit cards.
“The overall message was for students to become a more educated consumer,” says Johnson, who presented the workshops and also offered students advice on how to improve a low credit score.
Popp suggests you look out for low or zero-percent interest rates, and avoid credit cards that charge fees. These interest rates have a grace period, and if you miss a payment or your credit score goes down, the interest rates skyrocket.
“Traditional students should have a maximum of one credit card,” Popp says. “Non-traditional students have to be looked at on an individual basis due to family, work and other obligations.”
However, if you are a non-traditional student and have as many credit cards as “Sex and the City” character Carrie Bradshaw has shoes, here’s a helpful path to manage your credit:
USAtoday.com suggests you begin by keeping track of your spending. They even have a “young person’s budget spreadsheet” where you can input your numbers and figure out your monthly budget. USA Today also suggest contacting a financial debt consolidation company, or calling the credit card company themselves to set up payment arrangements. Most importantly, though, paying off all of your credit cards on time and more than just your minimum payment will help reduce the balance itself.
Yet, if you’re already stocked up on your credit cards and still want to use up that balance, shopping smart for gifts may just be the trick. Coupons are the new black this year, in my world. I personally cut corners where I can by checking out sites like coupons.com, couponcabin.com and shortcuts.com to help reduce my budget and eliminate debt for the new year.
Recently, I interviewed seven FAU students via e-mail. I asked them basic questions about debt, whether they are in debt and if so, how much debt they are in. Only two students were in severe debt.
“I’m about $9,500 in debt due to tuition, car emergency expenses and travel expenses for potential jobs out of the state,” says Tonya May, a 23-year-old grad student in elementary education.
Looking back, May says she wishes she had decreased her limit before it got out of hand.
“I should have called and told them to set a limit at $5,000. I am not spending any money unless necessary now. I’m not going out to eat or shopping for a while,” she says. “Not even for Christmas.”
Tey-Marie Astudillo, a junior majoring in multimedia journalism, says she is about $1,200 in debt due to living expenses, but she’s not too worried.
“It’s okay to have some credit card debt – we live in a credit-based economy,” Astudillo says. “The key is just to not get in over your head and remember that with each dollar of credit you use, you are going to be responsible for paying it back along with interest.”
It seems so simple, yet USAtoday.com reports that nearly two-thirds of 20-somethings carry some debt. With a reported average debt of around $16,000, 20-somethings are more likely to make late payments or charge off their debt to creditors or collectors.
In this holiday season, it is important to be realistic about exactly how much shopping your budget allows in order to remain debt-free, like the five out of the seven students surveyed are.
Tatiana Sodergren, a senior majoring in political science, made sure she at least paid the minimum payments on time, and before buying an expensive item, she made sure she could afford the monthly payments to get it paid off in a timely manner.
Sodergren also had some advice to young students: “My advice to freshmen is to be savvy. Know where your priorities are and spend your money there. When you’re going out, only pay cash and only bring what you can afford for the night. Not only will you save money, you’ll keep yourself from horrible hangovers.”
So as you shop this holiday season, keep in mind that with credit cards and debt, the more you mix them together, the more they may lead you to a horrible hangover that can last you all the way into 2009.
