As our children prepare to soon begin or continue their college education in the next few weeks, an important lesson that many college students learn too late is that nothing is free - especially credit card purchases.
A recent survey revealed that four in 10 people have signed up for a credit card to receive a free gift or special offer. More than half of those respondents - 52 percent - left college with credit card debt.
According to a recent study by student-loan providers, the average credit card debt for college students is about $2,748. Making minimum payments, it would take nearly 18 years and an additional $2,506.01 in interest, at a rate of 15 percent, to pay off the debt.
Experts say that credit card debt impacts more than just your wallet today. It can also affect your credit score well beyond your college years. The good news is students who understand their spending limits, adhere to a budget, and make payments on time, can build a solid foundation for future financial success.
Here are some tips:
*Students need to understand exactly where their finances stand. Regularly reviewing financial statements, along with their credit reports from credit-reporting companies, is a good way to understand where they stand at any given time.
*Negative records such as late payments and collection accounts can remain on credit reports for seven years. Students can keep their future finances healthy by avoiding these problems from the beginning.
*Creating a monthly spending plan can help students understand how much they need to pay toward their debts and how much they can afford to splurge. They should focus on paying off high-interest credit card debts as soon as possible.
*Prepare for emergencies by building up enough savings to cover expenses for two to three months. If they find themselves out of a job or unable to pay back their debts, graduates should immediately call their creditors and lenders to explain the situation. Many federal loan programs have deferment and forbearance programs.
*Consider loan consolidation options. Often, students who consolidate within six months of graduation or who sign up for automatic payments can save even more.
Good luck, college students, and may your futures all be bright and your debt load manageable!