Students Need Restraint and Guidance in Using Credit Cards
By Cynthia Mayberry, TG Manager, Texas Region

As with most of the rest of society, college students are relying more and more on credit cards to sustain daily living. In fact, the amount of credit card debt among students more than doubled between 1994 and 2004, according to studies.

A recent study by the U.S. Public Interest Research Group (U.S. PIRG) also shows that 76 percent of students have credit cards, and most of them received them through on-campus marketing efforts by credit card companies.

More than half of the students—55 percent—surveyed by U.S. PIRG said they used credit cards for “day-to-day expenses”. About 40 percent of the students said they used credit cards for “weekends and pizza”, and a fourth also indicated a credit card is sometimes used to pay for tuition.

Budget counselors such as Dr. Dorothy Bagwell Durband, director of the nationally acclaimed Red to Black financial and budget counseling program at Texas Tech University, say students should receive personal instruction on establishing credit and on responsible credit card use. For example, students should understand a credit card’s APR (annual percentage rate), as well as all the terms and conditions that determine how fees are calculated.

The bottom line is that students will continue to rely heavily on credit cards, which makes it vital to educate them about responsible use of cards and how to budget properly.

Here are some helpful credit card tips students should know:

• Limit yourself to one credit card – Credit cards can be all too tempting—easy to apply for and easy to use. To set a firm limit on spending, take out only one card. That will make it easier to set a regular pattern of purchases and repayment—and establish a good credit history.
  
  
• Understand all credit card terms – Before you take out a credit card, educate yourself. What is the interest percentage rate? Are there annual fees? Is there a different interest rate for cash advances? Get the answers before you decide.
  
  
• Set a time limit on big purchases – If you want a big-dollar item, put off buying it immediately. Consider the necessity and feasibility of repayment on such a purchase.
  
  
• Charge only the amount you can afford – Everyone lives on a budget. Work your monthly credit card expenses in to your monthly budget and make sure you can afford it.
  
  
• Pay more than the minimum – If you are not able to pay off the balance in full, pay at least twice the minimum monthly payment. Paying more eliminates the debt faster and gives you more room to spend on other items, like household expenses.
  
  
• Verify your statements – Check receipts against the monthly statement. That way, you can see patterns in your purchases, consider the amount you spend, and keep tabs on what you're being charged for interest.
  
  
• Shop around for the best interest rates – Watch out for "low introductory" rates. These can sometimes turn into higher rates if a payment is missed or is late.