Credit Counseling Services Overview
How Credit Counseling Works How the Debt Management Program Works What Our Services Cost
Financial Tips
Ways to Save Money How to Improve Your Credit Managing Credit When Your Life Changes
Budgeting Tools and Calculators
Housing Counseling
Group Presentations
Client Testimonials

Credit Card and a Free T-shirt – Do the Benefits Outweigh the Risks?

It happens the start of every semester. Credit card representatives blanket campus with t-shirts, coffee mugs and other gifts to entice students to apply for a card. Students also find tempting credit card offers tacked to college bulletin boards and stuffed in their mailbox.

How is a college student supposed to respond? By carefully weighing the risks, suggests ClearPoint Credit Counseling Solutions. Applying for a credit card costs nothing, but using one irresponsibly can cost you plenty. When you charge a purchase, you are borrowing money. If you don’t promptly pay down your credit card debt, your unpaid balance can balloon with hundreds of dollars in interest fees.

A 2005 report by Nellie Mae Corporation, a student loan organization, found that 42 percent of college freshmen have a credit card, and an average outstanding balance of $1,500. Once that student reaches senior year, the balance has nearly doubled, to $2,850. It only gets worse in graduate school. Nellie Mae found that the average outstanding balance on credit cards held by graduate students in 2006 was $8,612.

ClearPoint Credit Counseling Solutions offers the following tips to help college students keep their budgets balanced, their debts down and their financial futures positive.

• Avoid the “free t-shirt” and other enticements – Don’t base your decision on a novelty gimmick or a “rewards” card feature. Determine on your own whether you really need a credit card. If you have a practical budget that is serving you well, don’t mess with success.
• Do research - If you are ready to accept the responsibilities of a cardholder, find a card that meets your needs. Look for a low interest rate, no annual fee, and a low charge limit. Avoid “teaser” interest rates, which can expire in a matter of months. “Reward” cards typically carry high interest rates and benefit “big” chargers the most.
• Read the fine print – Before you sign on the dotted line, be clear about the terms of the offer, your credit limit, and any associated fees (late fee, rate on cash advances, etc.)
• Use the card responsibility – Don’t use credit like cash. Small, impulsive purchases can add up to a bundle by month’s end. So can charging your basic expenses. Don’t get in the habit of taking cash advances; they carry a high interest rate.
• Pay on time – Always pay on time and never miss a payment. If you can’t pay off the outstanding balance, make more than the minimum payment. Remember, you are building a credit history that will one day influence your ability to buy a car, finance a house, or even get a job. A bad credit record can follow you for seven years!
• Think about graduation - If student loans are financing your education, remember that payback time starts once you graduate. Tack on burdensome monthly credit card payments and you may lack the funds to afford decent housing, transportation or other living expenses.
• Set a semester budget - Calculate how much money you will need for books, rent, food, utilities and other necessities. Now, compare that figure to the amount of money available to you. If there’s a shortfall, you’ll need to earn some income. If there’s an excess, that’s your entertainment budget. Use it wisely to last the entire semester. Do not rely on a credit card to “get you through.”
• Consider calling home - Your parents may be willing to spot you a few dollars now and then. Just don’t make a habit of asking. They’d probably prefer to help you out now with some spending money than bail you out of credit card debt later on.
• Earn some cash - Missing a few outings in favor of working will not cause you as much pain as accruing a high interest rate credit card balance. Working a few hours a week will give you cash for campus happenings, without jeopardizing your financial goals.
• Don’t charge tuition – Charging tuition to your credit card is not a wise financial decision. There are education loan options that offer more favorable terms and interest rates. Check with your college financial aid office for more information.

Remember, if you end up deep in credit card debt, contact a non-profit organization, like ClearPoint Credit Counseling Solutions, that offers free, informational counseling services. A knowledgeable credit counselor can assist you to get on, and stay on, the right financial path.