Credit Cards

Credit cards offer some advantages and may be a useful tool for college students, allowing them to pay for emergencies or other unexpected expenses. Credit cards, however, must be used with discretion. Debt counseling professionals believe that college students, due to their financial inexperience, may be especially susceptible to accumulating more debt than is reasonable for them to pay. Because the interest rates on credit cards are so high, credit cards should not be a mechanism for long term borrowing.

Tips for Avoiding Credit Card Debt

• Credit cards are a good tool for emergencies. Anything you can eat, drink, or wear, however, normally does not constitute an emergency.
• Develop parameters for what is an OK use of your credit card. Car repairs may be appropriate, but pizza or CDs are not. Unless it’s an emergency, don’t spend money you don’t have.
• Remember when you use your credit card you are taking out a loan. It is a loan with significantly higher interest rate and much less advantageous terms than the long term educational loans available to you.
• Track your weekly and monthly expenses to get a handle on your cash flow. Often, just by recording how you’re spending your money, you’ll start to curb unnecessary expenses.
• Establish a plan for meeting your expenses for the semester and the school year by establishing a budget. The UW-Eau Claire budget worksheet can be a useful resource.
• Limit yourself to one credit card. For most expenses, a debit card, rather than a credit card, is preferable.
• For some families, allowing the student to use the parents’ credit card provides a back-up for emergencies but prevents the student from inadvertently building up unreasonable credit card balances. Research shows that students who consult with their parents about acquiring and using credit cards have lower debt.
• If you are in trouble ask for help. Rule of thumb: if you find you are unable to pay the full balance owed on your credit card for two months in a row, ask for help. Call home and/or arrange to meet with a financial aid counselor to discuss your options.
• You will receive many solicitations offering you pre-approved credit cards. You can opt out of these offers through the Federal Trade Commission website for mail solicitations - and by registering for the Wisconsin No Call List.