Freshmen urged to weigh pros, cons of credit cards

Thursday, July 30, 2009 | 12:00 p.m. CDT; updated 12:42 p.m. CDT, Thursday, July 30, 2009

A 2009 study by Sallie Mae, a leading provider of student loans, concludes that students use credit cards to live beyond their means, instead of for convenience.

The study found that 84 percent of undergraduates have at least one credit card, up from 76 percent in 2004.

At least 30 percent of them are using credit cards for tuition, and 92 percent are charging $2,200 on average in direct education expenses such as textbooks and supplies.

Credit cards can test a student's ability to impose self-discipline on spending.

Charging expenses on credit cards can very quickly spiral out of control when an individual is not educated about the dramatic interest charges, strict monthly deadlines and attractive available cash, said Brenda Noblitt, assistant director of Student Financial Aid.

The biggest downside of credit cards is not paying the full amount each month. That often happens when credit card owners can't control the impulse to purchase more than they can reasonably afford.

It could take up to five years to repay a credit card balance of $1,000 by making only the minimum payment each month.

Even falling behind by one payment can make climbing back to a debt-free account harder and harder. Late fees, interest and penalties build quickly, and minimum monthly payments usually can't make a significant dent.

For a student in college, with the pressures of a social life, working and academia, having a credit card may be too much of a temptation.

Other options to consider:

  • Debit Card – This card is accepted everywhere a credit card is (even the Internet), but it deducts charges directly from your everyday transaction account. This means only real money is being spent. 
  • Charge Card – This is a good emergency card, works similarly to a credit card, except that you must pay the balance in full each month.

Those who still insist on using a credit card may find these tips helpful:

  • Keep only one card.
  • Read the fine print.
  • Be aware of teaser rates – low introductory offers that are attractive only for a limited time.
  • Have a strict budget.
  • Track credit card purchases online weekly to watch for unauthorized payments.
  • Pay the balance in full each month — or more than the minimum to avoid high interest rates.

Sallie Mae also reported that 84 percent of undergraduates want more information on financial management.

MasterCard’s "What does Credit Mean?" program for college students at has an abundance of information and quizzes to help an individual get out of debt, find daily savings and budget.

Abusing credit could harm one's chances of renting or buying an apartment, prevent approval for a car or business loan and affect job opportunities.

Noblitt reminds MU students to get in contact with the student Financial Aid Office in Jesse Hall before the damage becomes irreparable. Financial aid advisers can help develop a plan to turn debt around.

They can also permit special circumstances if loan payments are in jeopardy because a situation is changed.

College is a perfect time to learn smart money skills that pave the way for a lifetime of effective household financial management.

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