Most likely by the time you graduate high school, you'll have a credit card. And even though you swore to your parents that you'd only use it for emergencies, pretty soon you'll find yourself using it for everything. So, how do you avoid getting caught up in a maze of debt? For starters before charging anything, make sure you'll have no problem whatsoever paying the amount at the end of the month. And try not to make late payments.
Credit card use and misuse are tabulated on your credit report so when you start looking for your own pad or want to lease that cute little car you've had your eye on, you'll have a rough time if you've consistently been making late payments. Building an excellent credit history early in your financial career will make your later years much easier.
Would You Like Credit with That?
Like it or not, one of the first persons you'll meet on campus will be someone handing you a credit card application. At college, credit card solicitations are everywhere. Company representatives have tables on campus. Applications are left in classrooms and in public areas... There is no escape. What do you do? If you don't have a credit card, ask your parents. They may have been banking at the same institution for years and may be able to secure the best rate for you.
If you're on your own, do some research. Pay close attention to which bank is offering the card, because terms can vary widely. For example, some banks require that the total charges are paid off each month, while some let a balance carry forward. Some banks also offer affinity cards, for which benefits such as airline miles are offered. The basic rule is, if the balance is going to be paid off every month, choose one of the cards with no annual fee. Inversely, if a balance is going to be carried over from month to month, choose the card with the lowest annual percentage.
Tuition & Credit Cards: A Tricky Issue
Using a credit card to pay for tuition may perhaps make sense if the card provides additional benefits, such as airline miles. This is true only if the account starts with a zero balance and you will pay the entire balance is paid when the statement comes. Remember, if any balance is carried forward, interest is charged from the date a purchase is posted; there's no grace period. Read more on this complex issue before you make up your mind .
Should You Have One?
The answer is probably yes. We recommend having one card where, if possible, you pay off the balance at the end of each month. When you're just starting out in the world, having a credit card can help you establish a credit rating. Plus, it's excellent insurance. You can't even rent a car without one. And, in an emergency, it's a way to get cash in a hurry (although cash advances are extremely expensive). Here again, though, having a credit card is a responsiblity. Many students fall into the credit card debt trap and have a hard time getting out of it. Often, it takes years and years. So, as with any new responsibility, take it very seriously. Spend only what you can afford and try to pay everything off at the end of the month. Hey, you're on your own now, you can handle it.
