College Student Credit FAQ

 

Face it -- not all students have the advantage of carrying daddy's plastic. Credit cards for most students are dangerous. It is important to understand and know how to use credit to your advantage so as not to be caught off guard by skyscraper fees and interest rates at the end of the month. Here are some frequently asked questions regarding college student credit:

 

1. How many students have credit cards?

 

Over 80 percent of college students have at least one credit card. More then 50 percent of freshmen carry plastic, and by sophomore year, over 90 percent of the the sophomore population have credit cards. Graduate students are no different, most of them carry as many as six cards. Credit card balance is directly proportional to level of education, with graduate students having the biggest credit card balance due to education expenses among the whole student body population.

 

2. Why are there so many credit card companies issuing cards for students?

 

Credit card companies know that when students can not pay their balances, they have the parents save them. They also offer attractive interest rates and benefits to college students because college is the time when most people get their first credit cards. Most people stick to their first credit card even after graduation.  So, college students are great customers!

 

3. Are credit cards bad for college students?

 

Credit cards should not altogether be avoided by college students because they can help them rent a car and get a good car insurance policy, as well as provide emergency funds. Establishing a good credit history is important and needed after college. It is wise to get a credit card while studying and make sure that the credit card is paid on time. College students should also opt for one or two low-limit cards. Using such will be easier for the student to stay within his or her budget and afford to pay the bills on time.

 

4. What happens when a student cannot afford to pay on time?

 

Usually credit card companies will increase the interest rates, as well as charge a penalty if a student falls behind on his or her payments. This will leave the student with a bad credit history, and will be seen in the report for as long as seven years. This will affect the student's ability to acquire future credit such as when he intends to buy a house or a car. Some students opt to enroll as part time students to cut up their work load and free up some time so they can work and pay for their balance. Some stop studying altogether and choose to work full-time to pay for their loans faster.

 

5. How can students manage finances so as not to fall heavily into debt?

 

Students should keep track of their money by mapping out a budget and listing all sources of income as well as every purchase and expense he makes. This way, the student will know exactly how much he has spent and how much he still has left.