Students should beware of credit card debt

Jun 6, 2008

Students should beware of credit card debt

College students are constantly bombarded by credit card companies.

From the hundreds of "You Are Approved" letters that come in the mail to free product giveaways for credit card applicants, there are many opportunities for students to indulge in a little plastic money.

But sometimes, that plastic money can turn dangerous.

Jeff Howard, a Lincoln entrepreneur and small business owner, got into severe debt while he was in college. That debt came back to haunt him years after graduation, when he had a hard time getting a loan to start his business.

"Credit card debt, no matter how necessary it seems at the moment, is never worth something that you can't pay off in the next month," he said.

Before making a decision on whether to get a credit card, students should consider several things. Most importantly, they need to understand how financially responsible they are. Students who have previously followed a budget or taken a loan out from their parents may be ready to handle the responsibilities of a credit card.

On the contrary, students starting out in debt or who only want a card so they can indulge in frivolous spending should probably hold off on getting a credit card, so they don't end up in serious debt.

Handling unexpected expenses and earning credit are two big perks to having a credit card. Also, having a good credit score is important for students when they begin to make investments or take out loans.

There are, however, dangers to having a credit card. The temptation to use a credit card as if it is free money is a huge risk.

While earning good credit can be a great thing, another risk may be ending up with a bad credit score. Failing to make consistent minimum monthly payments, especially on multiple cards, can quickly lead to bad credit. This can have a negative effect on a student's finances years after graduation.

"(Students should) make a budget that accounts for the amount of income that can be put on to a card but that can always be paid off in the next month," said Linda Maraman, office manager of Consumer Credit Counseling Service of Nebraska, a non-profit organization that offers free financial counseling.

Howard said his view on credit cards has changed since college. He said his experience shows that while debt can be a struggle, it may not lead to permanent financial problems.

"The key is persistence and to work hard," he said.

Source

http://media.www.dailynebraskan.com/