Credit card debt among students is growing by leaps and bounds. A survey by Sallie Mae, a major student loan provider, showed that 78 percent of undergraduates have an average of three credit cards and 32 percent have four or more. The average student credit card balance in 2004 was $2,998, up from $2,690 in 2002. The survey also found that one in ten will graduate with balances exceeding $8,000.

***Parents can help by teaching their kids about credit prior to them going to college. Learn more.

Finding Your Way
For many of you, learning to manage credit cards will be your fist money-handling challenge. Credit cards are ubiquitous. Credit cards do not seem like real money. Credit cards lead to real debt. There is little awareness when using the card that the bill still has to be paid. And often when the monthly statement comes in, the balance is startling. You wonder how on earth you managed to charge that much!

Then the ostrich effect sets in. It is so easy to ignore your debt level, to push it out of your mind and continue using the credit card indiscriminately. It is tempting to say one day I will be earning more more and then I will pay off my debt. Then never comes.

The reality is credit cards are convenient and useful, but they are terribly seductive. As a new user of credit, you will want to ensure that you are ready to manager credit cards to avoid student credit card debt.

Credit Cards Are Useful
There are good reasons for having a credit card:

  • For emergencies

  • To rent a car.

  • To provide a concise record of spending.

  • To dispute a charge. Since you have not yet paid fore the item it is easier to have the credit card company question the charge than if you paid cash.

  • To build a good credit history.

Credit cards are a useful financial invention. They have changed our economy, made life simpler, and challenged us, the users, to more sophisticated money management behavior.

Our jobs as consumers is to find our own best way to manage credit, to be fully informed about the cost of using a credit card and the cost of carrying debt on it, and to understand our unique reaction to the availability of credit cards.

Establishing Credit with a Student Credit Card
A good credit rating is important, and the first way to establish your history is to pay your bills on time. Having debt and demonstrating that you are responsible in making regular payments will also add to you credit report but do not take on debt for this reason until you are confident in your ability to make monthly payments. Having numerous credit cards will not enhance your credit history, in fact lenders look at credit cards as debt, even is there is no balance owed. So if you have a lot of credit cards, you could be turned down for additional loans because it appears to the creditors that you are burdened with debt.

You can view your credit history as important as your academic transcript. Some top medical schools now require that admitted students stay out a year to get their finance in order if they have poor credit rating and/or are carrying excessive credit card debt. The reason is simple. Graduate and professional school administrators know one of the biggest reasons students dropout is financial. These schools don't want to admit a student only to have him leave at the beginning of the second or third year. It leaves an opening the school cannot fill.

Related Reading:
Smart Credit Card Use
Applying for a Credit Card - Read the Fine Print!




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