Build Your Credit and Your Future
Some financial lessons are learned the hard way. Just consider what happened to Shawn Buchanan, a graduate student from Ohio University.
"During my freshman year, I used my credit card to make a purchase for approximately $500 on behalf of an adult who I trusted and who promised to reimburse me upon receipt of the bill," says Buchanan. "However, when the bill came, the person had no money to do so and I was unable to make the monthly payments on time."
Unfortunately, Buchanan is not alone when it comes to making poor money management decisions. Many young adults are ill prepared to take charge of their personal finances. Results from the 2002 Students in Free Enterprise report (SIFE) show that only 38 percent of college students prepare a monthly budget, 32 percent are currently in credit card debt and less than half understand how the stock market works.
Students tend to apply for credit cards, unaware of Annual Percentage Rates (APR) and interest charges because most college campuses and credit card companies fail to educate them about loans and credit card finances.
Because of prior lack of knowledge about APR and grace periods for repayment of purchases, many students do not consider comparing credit cards to determine which credit card is the best and/or the safest one to have.
Colleges don't want to alienate the credit card companies that pay them rebates based on how much each cardholder spends with an affinity card, which allow cardholders to make a contribution to a organization each time the card is used, according to Shannon Buggs of the Houston Chronicle, so the more a student charges, the more money a university can make. Some colleges have established codes of conduct for credit card solicitors; however, others choose to continue with this distribution for their own benefit.
"Because most credit card companies are competing for business, they may think that by educating the students, they will lose business to other companies that offer better rates or services than they do," says Donna Hazel, a sophomore at Delaware University. "Schools should perhaps begin to look at how they can assist students in making wise credit card choices."
Fortunately, there are some students who have been educated about spending wisely, especially during their college years when building good credit is so important. Those students learned that credit cards could serve users well during emergency situations, and by helping them to build their credit history.
Rasheed Hodge, a senior at Barry University in Miami, Fla., says, 'Applying for a credit card helped me when I was in quite a few financial predicaments, and they also helped to build my credit history because I was being told by car dealers and a few other financial companies that I had insufficient credit history."
Organizations such as SIFE (www.sife.org) have also developed programs like Credit-Wise Cats, a student-run counseling service designed to teach students about reducing debt, increasing savings, and creating budgets. Last year, the team facilitated workshops for 790 graduates and undergraduates. Test results have shown that students' knowledge of credit and debt management improved by one-third after attending the SIFE counseling sessions.
Students can avoid going into debt and protect their credit ratings by staying within their budget. And if they happen to max out their card, it is not wise for them to open another charge account until they have paid off the current one. Card users should try to pay more than the monthly minimum due on their bill in order to avoid accumulating high interest rate charges. They should also avoid using their credit cards for cash advances as those often carry costly transaction fees.
Most importantly, students should never make a purchase on a credit card that they can't afford to make with cash, unless it is a life or death emergency.
© 2008, Young Money Media, LLC. All rights reserved.
Comments
Credit and credit cards when used responsibly can be very helpful throughout college. If you keep track of your credit it will secure your future. Another good reference is.
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