Avoid Credit Cards (and Debt) in College

Think those credit card offers you've been getting in the mail are too good to be true? More often than not, they are. The lure of what seems like free money and the ability make purchases immediately upon signing up can be too much to resist for college students. Without considering the long term repercussions, you could end up in a world of hurt financially in the future. Nobody wants to pay for insignificant purchases they made at age 20 when they're age 30.

The catch with most credit cards are the high interest rates – this is how credit card companies make their profits. Simply, it's the rate you're charged for borrowing their money. Each month when you're billed, you'll have to pay interest in addition to the monthly charge for the money you've spent. Obviously, a higher interest rate means you're paying more per month, and a smaller interest rate means you're paying less per month. Most credit card companies add additional fees, like late fees for missed payments, fees for exceeding your limit, online and phone payment service fees, and annual fees for membership. Credit Card companies realize that most college students lack the financial knowledge and life experience to appropriately manage their money. Students often fail to read the fine print before signing up, spend in excess without keeping track of their balances, and end up with bills they can't handle. Missed payments remain on your credit report for years.

Of course, this doesn't mean you shouldn't have a credit card. They're useful for emergencies – like when mom and dad send money a day late, or when you've lost your bank card. If used right, they can also help you build a good credit history, which you'll need when you're buying a car or house. Employers might check your credit history when you're looking for a job, especially if it involves handling company accounts. Making timely payments each month shows you're a responsible person. If you feel you're ready to handle a credit card, be sure to know the interest rate and how it's affected by missed payments. Use it for practical purposes only and keep it secondary to your debit card. Keep the balance low enough so you can pay it off in a timely manner. Make all of your payments on time. It's important that you adopt these habits now to ensure an easier financial future.