Credit+Card+Summary

 Do college students need credit cards? Why or why not? [Christina] College students do not need credit cards. Although many do desire having a credit card under one’s name, they are dangerous and can lead to debt if you are not careful with making monthly payments and over charging. Usually college students are unemployed and do not have sufficient funds to make payments on a daily basis. As the payments pile up, a college student can feel overwhelmed. Many students drop out of school due to their lack to pay back their bills. They need to start working to pay back the overwhelming payments. This could lead to serious debt that leaves one with a bad credit score which can have an affect in the future. Some of these affects can be not being able to take out a loan, buy a car or purchase a house. College students should apply for a debit card which takes money out of one’s account automatically. A college student does not have to worry about over spending or going into debt. College students should remember to never be persuaded by credit card companies to apply for their own credit card. This just leads to trouble and no one needs to be in debt while in college. Student loans are already a huge part of many college students and credit card debt on top of that,is not a good situation. If a college student does decide to have a credit card, they should place a fairly low credit limit for spending. This way a student is able to pay their bill each month and feel confident enough not to go into debt.

If so, how many credit cards should a student have? [Christina] If a student does decide to apply and obtain a credit card, they should limit themselves to one credit card to begin with. One has to realize the pros and cons of the specific credit card they have and should remember that a credit card should not be abused; rather it should be used for emergencies and priority spending. Many credit cards have annual fees and become costly especially for students just starting out with a credit card. By having only one credit card under your own name, you will be able to control how much you are spending and how much you should spend each month. By having several cards, one can loose track of spending and this could lead to failure. Debt is a student’s worst nightmare and can be avoided by having only one credit card with a set credit limit. When having more then one credit card, debt and the failure to pay monthly bills is more likely. To avoid debt, one card is sufficient for any college student. What should their credit limit be? How did you make this judgment? [Carolyn] The credit limit on a credit card is the maximum amount that credit card company thinks the user will be able to afford. If a person does not have a job or does not make a lot of money, their credit limit will be lower than a person with a full time job or a person who makes a lot of money. It depends on how much money a person is making to determine their credit limit. I think that as a student, you should not have a very big credit limit. When you are a student, a small credit limit is good because it teaches responsibility. If you have a small credit limit, you will not charge everything to your credit card. Also, another advantage of having a small credit limit is that if your bill is not too expensive, you will be able to afford to pay the whole bill. What are some of the dangers of having a credit card? [Carolyn] Some of the dangers of having a credit card would be charging too many purchases to the card and not being able to pay them back. Especially for college students who normally do not have a lot of money, it is dangerous to charge too many things to a credit card. Students may think that because they have a credit card they can buy whatever they want. People need to realize that this is dangerous. In order to be able to pay your credit card bill, you should only charge purchases that you know you will be able to afford when your bill comes. It is important to be able to pay your bill every month for many reasons. Some of those reasons are if you do not pay your bill, you will receive a bad credit score and no other credit card companies will want to issue you a credit card and institutions such as banks will not be willing to lend money. What advice would you give to someone who just got a credit card? [Sarah] The advice I would give someone who just got a credit card is that I would tell them to not go overboard on the spending. To be able to achieve that I would tell them that they should put a budget on their credit card for them so that they never worry about going over and not being able to pay back the money later. I would also tell them that they should only use it when they really need it and if possible to use cash because it is a lot easier and you won't have to worry about paying a huge credit card bill later. I would also tell them that having a credit card is not as bad as some people say that it is that if you are just responsible and pay all of your bills on time you will be fine and be able to build yourself a good credit record which would help you when you get out of college to be able to pay an apartment.

How much of a balance should you carry on a credit card? [Sarah] When you have a credit card you want to have the lowest balance possible. It would be better to pay it all when it is due then the minimum amount. But for some people this is not possible. For example if you are the student you won't be able to pay it all at once. So if you had a total of 500 on your bill you would only pay like 200 and then you would have 300 left on your balance. But you would eventually would have to pay that balance. Yes, you can do that but you have to be careful about your balance because every month if you only pay the minimum amount it will keep on getting bigger and bigger.

What would you advise someone about their monthly payment when they carry a balance? What are the dangers of paying the minimum balance? [Kristin] How should a student choose a credit card? What are the criteria? [Kristin]

How important is the APR and the annual fee? [Ashley] As with any fee, the APR and annual fee should be taken into consideration when deciding which credit card to get. The APR, which stands for "annual percentage rate," describes the interest rate for a whole year, rather than just a monthly fee. There are two types, the nominal APR, which is the simple-interest rate for a year, and there is the effective APR which is the fee plus the compound interest rate calculated across a year. This would be important because you would not want a high interest rate in paying your credit car balance, or paying back a loan or a mortgage, especially if you know it will take you a while to pay off. The annual fee is an amount that a credit card charges yearly to people for carrying the card. If an annual fee is high, it may affect an individual's choice in choosing a credit card because if they could acquire a card with a lower annual fee, then they should.

What should you do if you have a credit card and can't make the payment? [Ashley] If you have a credit card and you can't make the payment, you should refinance your debt. This means that you should take out a new loan (with a low interest rate). Therefore, at the moment you will have the money to cover your credit card debt, then you can pay of the loan in time.