Credit cards and students don't mix well

By Joshua O'Connell
Posted Monday, August 5, 2002

All sorts of freedoms arrive with the beginning of college. It can be difficult to deal with them, and you can trip while learning what you can or can't do. But one privilege leaves little margin for error: financial freedom.

College students are constantly bombarded with solicitations for credit card offers. Indeed, the idea of "no cash, no problem" seems appealing. But the problems that can crop up from credit cards can create long-term struggles.

According to myvesta.org, the average 18- to 24-year-old has one credit card and carries a debt of $959. However, two-thirds of that age group do not carry any debt at all. Carry a lot of debt, spend beyond your means, and it can take seven years beyond your last missed payment with the cards before your credit is rosy again.

I thought about this long and hard before getting a credit card. I wanted to make sure I didn't become part of a statistic. I knew I wanted to build good credit, but didn't want to give myself the opportunity to overburden my finances.

A key to being able to build good credit with college income is to be selective about the card. Screen each offer and see where the Annual Percentage Rates will be once that "low introductory rate" they yap about is over.

I also figured out how much I could pay on my card each month, once essentials were factored out. The end result was a card with a good APR and a limit that I could pay off in two months, tops.

With the card I've made mostly smaller purchases online and at the supermarket, and have aimed to promptly pay them off.

The largest charge I've put on my card was $200 to pay for an extended warranty on my computer, since I didn't have the cash in the bank. Big mistake. I did it somewhat quickly, without thinking about books and other items I'd have to buy the following month for school.

It ended up taking me six months to pay it off, once I finally got the money to stop paying the minimums and instead finish wiping it out once and for all.

That brings up another important lesson: think ahead. Don't charge an item if the money won't be there to pay it off in the near future, especially if it's on an item that's not necessary for now, or even ever.

It's so easy to swipe that piece of plastic through the machine. Unfortunately, it can also be so difficult to deal with the consequences.

This column originally ran August 5, 2002 in the Connecticut Post.

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