Everyone 18 years and older has gotten one. They arrive in bright envelopes with lots of numbers in the form of percentages, mostly revolving around the number zero.
Flashy packaging, instant purchasing power and the promise of access to rewards programs are a big draw, especially to college students.
Now, what most people start with is the credit cards partner, the debit card.
This card provides electronic access to money you have deposited, whereas a credit card gives you limited access to a financial institution that foots the bill, with the condition that you will pay them back.
In simpler terms, debit cards deal with money you have; credit cards deal with money you typically don’t.
It would seem like there isn’t much of a trap to fall into. Yet, the average credit card debt of an undergrad is $3,173.
The general consensus from students is this: You get a credit card to build credit.
Buy a few drinks at Starbucks, some candy bars, Nutella, and then pay off the balance at the end of the month.
Seems simple enough, but the numbers say otherwise.
Credit cards aside, 76 percent of college students are in some form of debt, with the average student loan debt of a fresh college graduate being $20,000.
Credit cards aren’t always the best choice for students who are virtually going to school on
On top of that, having thousands in personal debt isn’t particularly appealing to a car dealership.
Idaho Central Credit Union’s Public Relations Manager Laura Smith endorsed Secured Visas for those paperwork ghosts looking to start building credit.
“With this product, members put money into a savings account to back up or ‘secure’ the money on the Visa.
The Visa is used, paid, and reported to the credit bureau just like a normal Visa.”
For those that already have a significant amount of debt, she recommends talking to a financial service officer.
This is someone who helps you create a breakdown of your debt, and advises you on what you should start paying off first, in order to make the biggest difference in savings and credit
On the other side of things, financial guru Suze Orman endorses a card of her own creation.
With the Approved Card, individuals have a prepaid card that can be continuously loaded and can be used wherever Debit Mastercards are accepted, including bill pay sites and ATMs.
The stipulation is it does not build credit, but there are no interest charges or overdraft fees, which one does not fully appreciate until they have to pay more in interest than the item is actually worth.
At the end of the day, credit cards can be a powerful financial tool to have at your disposal.
Credit building, purchasing power, and airline miles are all great benefits.
However, the numbers show that it is a responsibility that not everyone takes on at the right time.
So, before activating the card with the point zero percent something that fell out of the orange envelope onto your lap, consider getting some advice from a financial service officer, an experienced friend, or our own financial aid office on campus.
A can of soda tastes a lot better when it isn’t $35.75. Plus tax.