When I was in college (yes, way back when, just after the Big Bang), I would hurry to the student union building every morning to check for mail from home. Every now and then there would be a nice greeting card or letter from my Mom or Dad that had some nice green U.S. currency tucked inside. Back in those days, a five-dollar bill (or even a ten!) would make my week (didn't take much to make my week, huh?). As Mel Gibson shouted at the end of Braveheart, (temporary financial) freeeeeeeeee-DOM!
Today, things are a little different. First, parents don't send cash through the U.S. mail, since it may not reach its destination without being picked off by a disgruntled postal worker (no offense to happy postal workers, or even non-felony-minded, disgruntled ones). Second, almost all college students have their own credit card . . . which leads me to the alliterative topic of today's post: credit card cautions for college kids.
An interesting article in USA Weekend about credit cards posts some sound advice for both aspiring (and current) college students and their parents. There are four basic cautions.
4 things college students need to know about credit cards
by Mike Tucker
The Card Act - designed to protect consumers from questionable credit card practices - could help college students and recent graduates navigate the stormy waters of responsible credit card ownership.
Major provisions - with full implementation concluding this August - ban unfair rate increases and outlaw abusive fees and penalties. The new rules also require that consumers under 21 have a co-signer or proof that the debt can be paid.
That's great news for college graduates, who are ready to take on the world but still need an education in Using Credit Cards 101.
“Knowledge is key," says Barry Glassman, a certified financial planner in McLean, Va. “The new laws provide more knowledge so parents and their students can discuss what they're getting into."
Such discussions about how to handle owning a credit card have become increasingly important. “Studies show that an alarming number of students graduate from college with significant credit card debt on top of student loan obligations," says Gail Cunningham, of the National Foundation for Credit Counseling. “Even more disturbing: Colleges have indicated that academically sound students are dropping out of school because they need to get a job in order to meet their monthly debt payments."
Experts know that today's college graduates face a tough economy and job market and urge them to follow these credit card basics:
Shop around.
Find a card “with a low interest rate and low or no annual fee," says Kalman Chany, author of Paying for College Without Going Broke. “How you handle credit can impact future decisions."
Limit your cards.
“No one needs more than two cards," Cunningham says. “More plastic equals more temptation."
Pay off the balance.
“Don't end up paying interest on pizza and iPod downloads," says Erica Eriksdotter, of student loan provider Sallie Mae.
Be wary of incentives.
“Promises of airline miles and cash back are not free," says attorney Therese G. Franzen, who chairs a consumer financial services committee for the American Bar Association. “The cost of the incentives is included in the overall cost of the card - in its annual fee, interest rate and late fees."
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Hereare some interesting discussions on credit cards for college students posted on the College Confidential discussion forum. As with most aspects of life on Earth, moderation is the key to success. As I'm prone to say, ponder prior to plunking your plastic.
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