According to a recent report released by Sallie Mae, the average American college student carries five different credit cards, and the average balance students carry is $1,423. Approximately six percent of college students carry over $5,000 on their credit cards in debt. For students that graduate with high student loans, credit card debt only adds to their burden once they graduate.
It is not surprising that so many college students graduate with high credit card debt. Credit card companies often set up booths on college campuses and otherwise target college students in an effort to get them to apply for a card. Creditors bank on the fact that students will eagerly accept the card and they will profit off of it through interest and fees. Sometimes, the schools even receive a certain percentage as a kickback for allowing creditors to advertise on the property.
Unfortunately for college students, the thought of having a credit card is tempting but when the debt becomes too high, creditors will take action. No one needs to deal with wage garnishments or other types of judgments while they are in school, or afterwards.
As such, below are some tips pertaining to credit cards all college students in South Florida should know.
1. Do Not Choose a Card Based on Incentives Alone
Credit card companies will offer you many incentives in the hopes that you will choose their card over a competitor’s. However, you should never apply for a credit card based on these incentives alone. Only choose a card after you have thoroughly read the conditions and terms, and learned about the interest rate and fees. You should also compare these terms between several different credit cards before selecting the one that is right for you. The top credit cards for students come with low credit limits, low interest rates, and no annual fees.
2. Choose Just One Card
It is tempting to sign up for every credit card offer you come across, but doing so is usually a mistake. Every time you apply for another credit card, it actually lowers your credit score because creditors will consider you a higher risk as you take on more debt. Also, the more credit cards you own, the more likely you are to take on more debt than you can financially handle.
3. Do Not Charge what You Cannot Afford
It is not uncommon for college students to think that credit cards are for buying things they cannot afford. In fact, quite the opposite is true. Using your credit card for things you cannot actually afford to buy is the fastest way to get in over your head with debt. If you charge something you cannot pay for right away, you may end up paying five times as much for that pizza.
4. Pay Your Balance Off Every Month
All credit card companies will allow you to make only a minimum payment instead of paying off the full balance. This seems like a convenient option and it is, but it is also one that is more expensive. Paying your minimum payment every month will keep your credit score from dropping, but you will also still incur interest and late fees on the remaining amount until you pay it off. Again, that will only result in your debt climbing to an amount you cannot pay off.
If you are only charging things you can afford, you should also be able to pay your full balance off every month. It is very important you do, so you start with a clean slate every month and do not end up paying too much for the debt.
5. Do Not Take Out Cash Advances
Again, one of the more convenient options that comes with a credit card is that you can use it to take out a cash advance, just as you do with your bank card. It is always better to just use your credit card to charge the purchase rather than taking out a cash advance. Cash advances usually start adding interest from the day you take it out, and you will likely pay a finance charge between two and four percent. Using your credit card to take out cash will only increase your debt load and make it harder to pay off.
6. Do Not Loan Out Your Credit Card
It may seem like the nice thing to do to loan your credit card to your friend that is a little strapped for cash. This is one of the biggest mistakes you could make with a credit card. You never know what your friends will purchase on your credit card and if they do not repay you for them, you are still responsible for that debt. Additionally, the actions of your friends could also lower your credit score and make it more difficult for you to get credit in the future. If you and your friend become involved in a dispute about the debt, it could also negatively impact the personal relationship.
7. Do Not Spend Over Your Credit Limit
Most people do not intend to spend over their credit limit, but they end up doing so by mistake. Fees the creditors will charge when you are over the limit are very expensive, and they are also very difficult to get rid of. Due to the way payment dates and billing cycles are set up, you may think you are bringing your balance back under the limit, but you are soon over again due to fees and finance charges. The best way to ensure you do not spend over your credit limit is to stay within 10 to 30 percent of the credit limit.
Speak to a Debt Defense Lawyer in South Florida if a Creditor Threatens Legal Action
The above tips are useful, but college students still incur more debt than they can handle, and creditors still take advantage of them. If a creditor has threatened to take legal action or has already filed a lawsuit, our South Florida debt defense lawyer at Loan Lawyers can defend the claims against you. Call us today at (954) 523-4357 or contact us online to schedule a free consultation.
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Loan Lawyers is made up of experienced consumer rights attorneys who use every available resource to develop comprehensive debt solution strategies. Our goal is to take on those burdens, resolve those problems, and allow our clients to sleep soundly knowing they are on the path to a better future.
