March 26, 2008
College Students and Credit Cards
By Mr. Chris Brown
Director of Financial Assistance
College students are inundated with offers from credit card companies. They are aggressively courted by the lending industry, and the allure of “buy now, pay later” could tempt even the most financially prudent undergraduate. Students are offered gifts for applying, low introductory interest rates and pre-approved credit limits.
Following are some cautionary notes for you and your student to consider if he or she is looking for a credit card:
- Sort through credit card offers with great care and caution; what looks like an amazing short-term interest rate can become very expensive in the long term. Be sure to read the fine print on all offers.
- Paying the minimum balance on a card increases the interest expense because the payment period is extended.
- Cash advances often carry additional transaction fees and higher annual percentage rates.
- Late payments can increase the interest rate.
- Having multiple credit cards can harm an individual’s credit rating even if they don’t reflect outstanding balances.
To be sure, credit cards carry some risk. Even so, they can also be beneficial. Used appropriately, credit cards allow students to begin building a positive credit history and learn how to budget expenses and track purchases.
Obtaining a credit card is a personal decision and a good way to discuss finances and budgeting with your student. However, if you decide a against obtaining a credit card, you may want to consider alternatives, such as: pre-paid re-loadable credit cards, retail store gift cards, secured credit cards or debit bank cards.
Contact: Chris Brown, (989) 463-7347
