Students and Credit Card Debts - Realise The Seriousness Of Getting Into Debt!!

You've just got your first credit card. What do you do with it? Well you use it of course. That is what millions of students are doing. Everything from gig tickets, to text books and groceries go on the card.

The wonder of having your own plastic is just too much. It is like an emblem of adulthood. Once you have that little piece of plastic in your wallet you seem to be a free and independent person.

Students and the interest they pay are making a fortune for the credit card companies. Students may have great grades in every subject but no one ever thought of teaching them about personal finance.

It's no good being moralistic about student debt. Debt is a way of life for students. They take out loans to pay their fees and living expenses. They know that their parents have debts. These kids were raised on credit and they expect to be in debt when they graduate.

But credit card debt needs to managed carefully. Credit card debt is different to other forms of debt. It grows and grows.

The problem with credit card debt is that is expensive debt. The interest rates on a credit card are always higher than those on personal loans or even authorized overdrafts. Once a debt begins to mount on a credit card it builds up quickly. It soon reaches a size that is out of all proportion to the original debt. This is especially so if the student gets late payment fees slapped on top of the debt.

Most students think they will be able to clear their debts when they graduate and get a job. Some employers even offer "golden hellos" to clear student debt, or at least they used to, that is increasingly becoming a thing of the past. In the present climate few students will be able to clear their debts quickly, or at all, when they graduate. Starting salaries are typically lower than they were. If the economy goes into recession unemployment may hit graduates too.

So it is important to have a realistic view of debt. A student cannot afford to come out of college with a debt that is beyond their ability to pay. It will be a crippling expense and may harm their credit score when they come to buy a house.

The credit card can be a terrible trap for the unwary student. It's best to chose other forms of debt first. Student loans are usually available at better interest rates. It may be possible to agree a bank overdraft at a reasonable rate.

A credit card should be the last resort. Generally speaking the credit card is best kept for internet purchases where it gives some security or for sums that can easily be cleared within the month.

Avoid making a minimum payment only. This is the way debts build up on the card. The credit card companies rely on our inertia to make money out of us. Clear the credit card every month. If this sound seriously uncool then just don't tell your friends about it.