How to Avoid Further Debt After College

At graduation, the average student will have some kind of student loan to repay. Many students have a hard time figuring out how to get out of that debt, let alone the extra debt that comes from four years of improper credit card use. Having a credit card in college doesn’t mean you have to use your entire credit limit. Learning how to use your credit card wisely now will keep you from having to dig yourself out of debt later in life. It will also help you improve your credit score, which will in turn help you succeed in the future.

Reasons to have a credit card

There are many good reasons to get a credit card, and they can be necessary in certain situations. They protect your purchases, allow you to shop online, and give you a backup plan in case of an emergency. One major rule that many successful credit card users follow is to only use the card when you need it and not for unnecessary items. Also, paying off the card as soon as a purchase shows up on the account can help your credit rating. When you keeping a zero balance on the card, while still using it for purchases, your credit report will show that you are financially responsible.

Carrying a balance can get expensive

The interest rate on your card could end up costing you a lot more than you intended to spend when you bought that nice dinner or that expensive birthday gift. Your credit card company may be lending you the money, but they get back a lot more by charging you interest for the money on your account every month. The finance charges could be up to 25% of your monthly bill, and annual fees could range from $20 to $100. If you aren’t able to pay the minimum amount on your credit card each month, the late fee could be between $25 and $50. These extra fees add up quickly, and not paying off the entire amount on your card every month could lead to many more finance charges, which could in turn dig you further into debt.

Credit cards and the law

Credit card abuse has become a problem in the United States. In fact, recently the federal government saw how important it was to protect college students from the consequences of poor credit card management, so they changed the way credit card companies are able to do business with students. Cards cannot be issued to students under the age of 18, and a cosigner is needed for card users under 21 years old unless that user can prove that they have the means to pay the credit card bill.

Choose the right credit path

When looking for a credit card, it is not always wise to choose the student cards so many companies like to give out. They usually have very high interest rates, which could end up costing a lot more than you’d like. Another option you should consider is getting a secured credit card because with this type of card you can put your own money into a savings account and the card uses the money you already have available to you. Your history is still reported to the credit bureau, but you don’t have the temptation to spend more than necessary. You could also become an authorized user on a parent’s credit card. If they are financially responsible the interest rates and fees on the card may be less than those on student credit cards. After using one of these options for a few months, you should get your own offers for a card with a lower interest rate.

Building your credit is important

The credit history you build in college will help you after college immensely. You will need a good credit score to apply for an apartment, buy a car, or finance another large purchase. A potential employer may even run a credit check before they hire you. Credit problems stay on your report for seven years, so any missed payment could hurt you for a long time. Following a few simple guidelines will keep you out of financial trouble and help pave a path to a debt free future.

The Author

Amy Young is an author of finance articles who writes about various topics including how to get a credit card with no credit

A note from Beat-Tuition

Amy volunteered to provide some tips about credit cards for students - I hope you enjoyed them. And I hope you stay out of debt after college, too.

In general, I recommend avoiding credit cards. If you have to use one, then Amy's advice is just right.

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