Marcelino Ramirez

Trying to get you out of college financially  sound...

Financial Advising

Why do Credit Card Companies Target Students?

Surprisingly, students are a good credit risk, despite the fact that they often do not have jobs and are also borrowing student loans. Research has shown that student borrowers are valuable customers because they tend to stay loyal to their first card, continuing to make purchases for many years to come.

 

The Advantages of Credit Cards

Like loans, using credit cards can help you build a positive credit history. This can enhance your ability to receive a private student loan, buy a car, rent an apartment, get a job, and eventually, try to buy a house. Of course, there are other advantages to having a credit card including:

· Security in emergencies;

· Reduced need to carry cash or checks; and

Enhanced personal responsibility and independence.

 

So, Are You Ready for a Credit Card?

According to the PIRG study, of the 79 percent of surveyed students who use credit cards for multiple purposes, only 13 percent reported limiting credit card use to emergencies.

When making your decision about a credit card, ask yourself the following:

· Do I need a credit card?

· Can I afford a credit card?

· Low interest rates or finance charges (combined, they are called APR)

· Low or no annual fees

Credit cards can be helpful in emergencies or if you are able to pay off the balance each month, but be wary!

 

Fees

· Watch out for carrying balances. Some cards charge 20% or more in interest. (Interest is usually called "finance charges" on your statements.)

· There is usually a large finance charge for cash advances and interest begins accruing as soon as you take the money out, not after the next statement closing.

· Be aware of annual fees. Many times you are charged $50 or more just to have the card.

 

 

1. Track it
Track your spending for two to four weeks to find out where your money is going. Are four trips to Starbucks a week really necessary?

 

2. Get a plan
The best way to manage your money over the course of a semester is to sit down and map out a budget. List sources of income such as scholarships, loans, money from summer jobs and cash from your parents as well as expenses, such as tuition, books and groceries.

 

3. Good time money
If you know you need to buy a new CD or go to concert or a party every week, make room for that in your budget.

"You need some entertainment,"

"A student is going to get really burned out if you don't do anything fun."

 

4. Set your own credit line
"Just because you have a credit card with a $2,000 credit line doesn't mean you have to spend $2,000,". "If you know you can only pay back $500, then just spend that."

Afraid you'll spend as long as there's room on the card? Call your credit card company and request your credit limit be lowered. Card companies will try boost up your credit lines so you spend more. Tell them "no" each time they try.

 

5. Stuff happens
If you bust your budget on something you really, really want to do this week, make up for it next week.

If you find that you must go out to dinner and a movie one week, spend the money; be satisfied with the decision, and commit to staying home, eating at home and not making any other purchases the following week.

 

6. Look ahead
Whether it's a road trip with friends or an auto insurance bill, if you know a big expense is coming, start putting some money aside to pay for it.

"It's a lot easier to set aside $50 every month than to come up with $300 when the bill is due,"

 

7. Get in touch with your “Roomie”
Contact your roommate before the semester starts and divvy up expenses. Chat about who will bring a refrigerator and who will bring a microwave.

This way you avoid duplicating purchases and excess spending, but will still have all the conveniences to make college life easier.

 

8. Spread it out
"Most of the big expenses are at the beginning of the school year,"

"Buy books as you need them. That will spread out expenses."

Don't forget to check out prices from online bookstores. They may give you a better deal than the campus bookstore. Buy used books whenever possible.

 

9. Ask for help when you need it
"It's very difficult to say 'I'm in trouble and I need $2,000' or 'I spent my student loan money,' "

Muster up some courage and phone home. The longer you put it off, the worse things get.