← Equal Pay Day TV’s Hottest Criminal Investigators (Her Version) →

A Student’s Guide to Credit Cards

For many young adults, credit cards are seen as a financial right of passage as well as a milestone in their quest to reach independence. While these are both noble things for recent graduates and college students alike, credit cards can act as a double-edged sword that many of the uninitiated find out the hard way.

As a multi-billion dollar industry, the credit card and merchant services industry has large incentives to capture the naïve before they learn the ropes. Too often you hear about the uninformed student that was capsized financially by a credit card debt that forced them to quit school or file for bankruptcy before they even cash their first paycheck. While these stories are the minority, there are pitfalls to watch for. But with the right attitude and proper education, young adults can make the transition from dependent to independent without falling in the pit.

Why are Students So Heavily Targeted by Credit Card Companies?

There are a number of reasons why credit cards are marketed so heavily to college students. As mentioned above, this is a multi-billion dollar industry, which means there are a lot of smart people attempting to make sure their card ends up in your wallet or purse.

Impressionable – Like it or not, college students are very impressionable, especially when it comes to advertising. While some will argue that Gen Y has become immune to ads, the truth is they are easily swayed by what they see in popular culture. When young adults see Kim Kardashian on her TV show while on a shopping spree and paying for everything with a Gold American Express, it becomes associated with what she has. This is very powerful and you can bet that American Express paid her to do it.

Brand Loyalty – Countless studies have shown that people are loyal to the first bank that shows their trust in a person. Talk to any adult over 30 and there is a good chance they still have the first credit card they were ever approved for. Credit card companies are very aware of this, so the battle for who gets you first is being waged before you even turn 18 (or 21 without parent consent.) Not all credit card branding is aimed at adults. Visa and MasterCard have recently struck up deals with popular kid board games and the makers of Barbie to help spread their message. They know if they get you early, they get you for life.

Students Have Money – This tends to go against what most college kids believe, but the truth is that most students have some expendable income. Whether they get that from their parents or a part-time job, they have some money to spend on food, entertainment, and anything else that is a want or necessity.

How Do You Manage a Card Once You are in College?

If you are a student who has or plans on getting a credit card while still in school, it is important to know that you will begin shaping your long term credit card habits the moment you put it in your wallet.

Keep Track of your Expenses – Purchases on credit cards do not come out of your bank account, so it is important to keep track of what you are spending. This process is not very complicated if you use a program such as Mint.com. It will keep a running total of all your expenses and let you know on a daily basis where your balances are at. If you do not want to use software, simply keep your receipts and mark them down in your check register or a piece of paper.

Set a Budget – It is important that you know the value of budgeting before you start using credit cards. The idea of a budget is to tell your money what to do rather than trying to figure out where it went. By sitting down on a weekly or monthly basis and writing down what you have and want to spend money on, you will gain a level of control over your finances that many adults have yet to master.

Pay Off Your Balance – This one should go hand in hand with your budget. It is very important to stay on top of your credit card usage and make sure that you pay off your balance every month. By avoiding the cycle of interest as well as the enticing thought of monthly payments for large purchases, you will find yourself ahead of many of your peers.

Life After College can be Impacted by Credit Card Use

It is important to get a handle on your credit card usage while you are still in school because it can have a negative impact on your life after college. Since credit cards are so heavily marketed and easy to obtain (now with a parent co-signer) it is not difficult to find yourself in a pile of debt before you have even earned your first dollar, post-college.

In today’s competitive job market, prospective employers are looking for any reason to separate the numerous candidates they get for each job. This is why many of them have started running credit checks on candidates. While this seems like it may not be a big deal, if you ran up a lot of debt in college, you may find yourself in a catch 22: desperately needing a job to make your payments, but unable to get hired because of your debt burden.

← Equal Pay Day TV’s Hottest Criminal Investigators (Her Version) →