Guide to Money & Credit

Money and Credit 101

Unfortunately, you can’t register for Money and Credit 101 when you go off to your university or college. There is no such class, but perhaps there should be. College students often find themselves in over their heads with credit card debt, or in situations where they’ve been scammed out of money. You can avoid these traps by following the advice below when you “shop” for credit cards, apartments, financial aid, and travel opportunities.

According to a National Consumers League study, 63% of teens say they get most of their information about money and credit from their parents. So parents, this article is for you, too. Set a good example by managing money and credit wisely.

Credit Cards

The National Consumers League study also found that 58% of teens plan to get their first credit card sometime between turning 18 and graduating from college. Since the amount of time college students have available to earn money is usually limited, be careful not to rack up those credit card bills. Even if you have a part time job, credit card payments may eat up a significant portion of your income.

• Credit card interest rates can be as high as 18%. At this rate, if you have a $2,500 balance, you are paying $450 a year in interest. While paying the same amount each month (say $100) is admirable, it will take you two and a half years to pay off the interest and balance in the above example. Think about a purchase before you make it, and ask yourself if it’s really worth it. Consider using your credit card for emergencies only.
• Watch out for card issuers that raise your interest rate if you make late payments. For example, if you make 2 late payments within 6 months, the card issuer may raise your interest rate from 18% to 24%.
• Look for a low interest rate when shopping for a credit card. If the rate is introductory (lower for a certain amount of time), take note of when the rate will go up and by how much.
• Annual fees can range from $20 to $300, so look at those as well. You may have to pay the annual fee whether you use the card or not.
• With each credit card, compare the late payment fee, any fees for cash advances, as well as the fee for going over your credit limit.