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Credit Cards...
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Credit cards have sometimes received a bad reputation in colleges.
Responsible use is the key.
They're sometimes blamed for students racking up enormous bills.
In other cases they simply are avoided like the plague, and the words 'credit-card' are almost curse words at some universities across the world.
The trick is not to avoid them, because they do serve a useful and necessary purpose... but rather, learn how to manage their use responsibly.
They serve emergency needs, sometimes serve as identification, are easy to protect against theft and fradulent use... and make it possible not to carry a lot of cash.
What Credit Card Companies Know
What most college students forget is that credit-cards are actually lenders of money, like banks. And while card users might not get a bill for a certain purchase, for a month or so... there is a credit blance that still needs to be paid off.
You made a purchase and there is a debt. However, it's sometimes difficult to remember exactly what all those small purchases were...
And then the bill comes... it's a bit of a shock.
Knowing this, credit-card companies are making more money than ever off the interest that accumulates from each unpaid balance.
And when they offer you low monthly minimum payments, college students can feel like they are the 'winners' in this transaction.
What's Actually Happening
If you were to take your higher interest rate credit cards and figure out how many payments you would have to make (figuring in interest) in order to pay down the balance, you might be shocked.
That $75 sweater is actually going to cost you $200 with all of the interest you accumulate from only paying the minimum monthly payment.
In order to avoid these complications, you need to learn to use credit-cards wisely. Here are some tips:
- Only use credit cards in emergencies - Problems with school fee payments (like your bank's computers are shut down), car troubles, etc.
- Create a budget for yourself - For example, only allow yourself to charge so many dollars each month.
- Pay off the balance each month
- Research your credit card options to find the one with the lowest interest rate - You can find current interest rates on many online credit sites and then compare to see which one is the lowest
It's not about avoiding credit cards when you are a college student, but rather, learning how to use them responsibly in order to manage your financial future effectively.
Credit-cards are a great way to increase your credit rating for future purchases like a home and automobile.
When you show that you can manage your money and pay your bills on time, you may come out of college not only debt-free, but also well-educated (in money matters).
