How to avoid the high interest rate credit card trap on campus

The hot and hazy days of summer will be coming to an end soon, signalling the start of thousands of college and university students getting ready to head back to school in the fall. Students will be trading their beach-ready flip-flops for sneakers. However, heading to campus also means a higher risk of racking up hundreds to thousands of dollars of high interest rate credit card debt.

When students head back to campus, they will be greeted by various credit-card issuers incentivizing them with free gifts – all of which can appear harmless at first. However, university and college students are the cream of the crop to credit-card companies. How so? These students make a lot of expensive purchases for tuition, books, clothing and food. Most of these purchases are on a high interest rate credit card. And because many students do not have a sense of financial literacy, they end up treating their credit card as free money, instead of thinking of credit as a loan which needs to be paid back.

“Campus life is filled with many opportunities from getting involved in a variety of extracurriculars to making everlasting friendships,” says Jeffrey Schwartz, executive director, Consolidated Credit Counseling Services of Canada. “The dark side is when students accept offers from high interest rate credit card issuers without considering the repercussions of living on credit.”

“Don’t get me wrong, having a credit card is not a bad thing,” he says. “If you use your credit card responsibility, you can establish a good credit history, which is a plus when you go to apply for a car loan or mortgage many years down the road.”

Although there are many benefits to credit cards, students on college and university campuses need to think: “is credit really necessary? Can a student live without a credit card?”

“Higher learning can be expensive; however, it will present you the key to your future,” says Schwartz. “While you are in school on a limited income, it is important to not take on more debt than you already have. Maybe now is a good time to adapt a cash-only lifestyle and live frugally.”

Consolidated Credit Counseling Services of Canada understands the financial burdens college and university students are under. To help students manage their debt while pursuing a higher education, students can use the following tips to stay ahead of the class:

Shop around

Don’t fall for the incentives and freebies. It may cost you in the long run if your interest rate is sky high. Instead look around for a credit card with a low interest rate and low fees.

Read the fine print

Behind the bells and whistles, you have an interest rate to be aware of. Understand your credit card agreement and the penalties involved for missed payments. Missed payments will affect your credit score.

Take it all off

Pay off your credit card balance on a monthly basis. When you leave a balance, interest will be applied to it. Remember that awesome deal you charged to your credit card? It will end up costing you more the longer you carry the balance on your credit card. Not much of a deal, now, is it?

When are you due?

It is always a good idea to pay your credit card bills four to five days prior to the due date. This way your payment will arrive on time and not two days after it’s due.

Get help!

Spending money you don’t have can be addictive for some students. Nothing feels better than going on a shopping spree after a rough exam. If you are tired of struggling to stay on top of your debt management – seek the guidance of a trained credit counsellor. They will help you create a budget to live within your means.

 

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