What Are Your Beliefs About Credit Cards?
I was at the park last Sunday afternoon with family. A cute little girl on the playground was standing behind a window playing the cashier. She was collecting “money” from other kids and giving them something in return. The ground was made up of wood chips, which was the money. Children would grab one wood chip, take it to the cashier, and she would take the wood chip and slide it as if it was a credit card. She would then give them a handful of wood chips in return. This little girl understood that if you have a card and you simply swipe the card, you will get something greater in return. She is not growing up with a “cash register” with coins and bills, but growing up in a world of card readers and credit.
We have all formed beliefs about credit from a young age. Some children have been told, “never get a credit card and if you do, I’ll cut it up.” While at the same time, they have been told to eventually get a credit card because it would be good for them. Which leads us to the question, is having a credit card good or bad for you?
We are not going to suggest that having a credit card is good or bad for you. If you simply can’t handle one, it's best you don’t have one. However, there are some positive benefits if you use it responsibly. Having been in college over a month now, it’s almost certain that you have had unexpected expenses. Maybe you even had to use a credit card to cover those expenses.
We want to provide you with a few suggestions when it comes to managing your credit card.
Don’t Buy It If You Can’t Afford It
As mentioned from the story of the cute little girl, we are conditioned to think that all we have to do is swipe the card and we will be fine (the companies are at fault). For many college students, the mentality is it’s a lot easier to spend money that is not yours and tell yourself that you will pay it back. In a study done this year by CreditCards.com mentioned while 55 percent of college students in 2015 believed they were responsible enough to have a credit card in their own name, 52 percent believed credit cards encourage overspending. While 59 percent of college students never or rarely charge a purchase unless they already have the money to pay the bill, 25 percent said they sometimes charge purchases when they don’t have the money to pay for them and 15 percent said they frequently do. Don’t buy it if you can’t afford it because it can lead to more complications.
Pay Off the Full Balance On Time
Not only is it important to not carry a balance, it is more important that you make the payment on time. Eighty percent of students with credit cards in their own name in 2015 were responsible for the bill. But not all college students used credit cards responsibly. Only 66 percent in 2015 reported paying their credit card bills in full each month. Among the 34 percent that carried a balance, the average balance was $466. Twenty-seven percent in 2015 had been charged a late payment fee. Of those, 54 percent had been charged late fees more than once
Use The Best Credit Card
As you can see if you are 23 and carry a balance of $1,109 on a credit card with an APR of 24.99% you are going to be paying $277.14 a year in interest (that’s a small vacation). Having a bad credit card or more than one credit card with a balance can add even more trouble. Despite tougher credit requirements, some college students still have multiple cards. In 2014, 12.1 percent of college students had two cards, 5.3 percent had three cards, 2.6 percent had four cards, 1.4 percent had five cards and 3.2 percent had six or more.
As you get closer to holiday spending, we invite you to keep in mind these three tips: Don’t buy stuff you can’t afford, pay off the full balance on time, don’t carry a high balance. We’re confident that if you learn to use a credit card responsibly it will have a major positive impact on your financial future.