You Owe How Much on your Credit Card?!

You’re a college senior and owe almost $3,000 to some huge credit card company! What are you going to do?

Don’t worry, we haven’t been spying on you. But many college students, freshman through senior, are more in debt than you probably think. In 2005, the Nellie Mae Corporation reported the percentage of freshmen who have credit cards. What do you think that percentage is?

1. 9 percent
2. 26 percent
3. 42 percent

Our Consumer Credit Counseling Service (CCCS) agency shares the answer below. Here’s a hint, though: Credit card companies actively market to college students. Simply put, if you’re a college student, they want you as a customer.

They’re pretty good at landing college kids as customers, too. By now, you’re surely familiar with the routine. Credit Card Company Representatives swarm to college towns periodically. They visit campuses and set up booths at the local mall. Tables decorated with exciting banners and free promotional merchandise (just for applying) attract crowds of students and passers by.

However, what began as a free t-shirt or jump drive can lead to some serious financial trouble. The answer to the above question is 42 percent. Yes, they’re pretty good at enticing you to sign up.

Here’s a follow-up question: Of those freshmen with cards, what do you think the average debt is?

1. $250
2. $750
3. $1,500

Again, the correct answer is C. By their senior year, the figure jumps another $1,350 to $2,850. And, for those in graduate school, it balloons to more than $8,500.

Clearly, college students may want to rethink visiting that free t-shirt booth. In addition, here are some tips from the debt management professionals at CCCS:

• If you absolutely must have a credit card, find one with the best terms available to you. Features like no annual fees and low rates make sense.
• Decide going-in that you’re going to be responsible with your card. Don’t carry debt month-to-month. And, know how you’ll pay off each and every charge. A low, manageable credit limit will also help with this goal.
• Don’t impulse shop. This goes for meals, snacks, and online purchases. The small stuff can really sneak up on you. Consider not carrying the card with you to minimize the enticement.
• Make sure you understand the terms listed on the application. If you’re unsure, ask around. Tap a finance or accounting major if necessary. Those people love to crunch numbers. (And if you are a finance or accounting major, offer to help your friends with this sort of thing!)
• Remember studying the plague in History 101? Avoid the dreaded “cash advance” as though it were the plague. You’ll thank us for that tip. Interest rates on cash advances are excessively steep.
• When the bill arrives, take care of it well before the due date. You’re a savvy college kid, right? You can even make your payment online! Just get it done in a timely fashion and, if you’re not paying the full balance, pay more than the minimum. This will help your credit profile. But miss a single payment and it will make a negative impact on your credit report.
• When you’re finished with college, you want to start your new life with a clean slate, right? Keep that notion in mind. You may face some start-up expenses with your job or new apartment that make sense paying off over time. But if you’re carrying a large balance upon graduation, you may have too little credit available.
• Budgeting is good! If you’ve surfed around on our web site, we hope we’ve made that point absolutely crystal clear. Early each semester, take a bit of free time to figure your expenses for the coming months. What are you going to need and how much do you have? If you’re coming up short, you know it’s time to address the issue now.
• Avoid making tuition payments with your credit card. Many students have made the mistake of charging tuition payments. More often than not, student loans are available with better interest rates than your credit card company offers.

Before school’s out on this topic, here’s one final test question for you: When you’re in need of credit counseling, budgeting, and general debt management assistance, what company can help? That’s an easy one… The answer is our Consumer Credit Counseling Service (CCCS) agency.