Understanding credit
You may be asking yourself "Should I get a credit card?" It depends. What are your needs? How would you grade yourself on self-discipline? While you may need one, it can get you into trouble.
The perils of credit
According to one major student loan provider, close to 25% of today’s college students carry $3,000 or more in credit card debt, and about 10% owe more than $7,000!
You already may have resigned yourself to the fact that repaying school loans will put a damper on your post-graduation budget. Consider the consequences of adding credit card debt to that burden. Using a credit card is just like taking out a series of very small loans.
Credit card companies are not as forgiving as most student loan providers. In fact, their business models are based on the notion that many people will fall behind and develop the habit of sending in payments that cover little more than the interest on their balance. In this scenario, you're a monthly ATM for the lender because they are making money off the interest you pay.
Arguments in favor of credit cards
There are, however, certain reasons you might want to carry a credit card.
- You hope to establish a good credit score early in life. If this is the case, you need to have the financial resources to pay credit card balances in full each month.
- You are able to regard credit cards strictly as an emergency form of money, and have the self-discipline to avoid wavering from that point of view.
Paying monthly credit card balances in full is more than good budgeting practice. It's also a way of “building your case” as a responsible credit customer who one day will want to borrow more significant sums of money.