New College Students Need To Know The Risks Of Using Credit Cards
School is about to open once again and a new batch of college freshmen are going to be making their appearance in the many colleges in the country. Among the many rituals that new college students go through, one particular ritual stands out because of the financial risk it brings to the students and to their parents as well. This is, of course the aggressive credit card offers that spring up every time college opens.
This year may actually be the last year for these offers to come about in college campuses. On February of next year, the credit card bill will become active and credit card companies won’t find it so easy to entice college students to apply for their plastic. New legislation included in the credit card bill will prohibit credit card companies marketing their credit cards in college campuses. College students will also not be able to get credit cards as easily as they can right now. Legislations included in the credit card bill will require college students to have a co-signer or to prove that they have independent financial means for balance payments in order to be eligible for a credit card.
College students have traditionally been one of the most sought after markets for credit card companies. An odd but effective preference as college students who carry credit cards are most likely to carry balances month after month. Also, college students can usually get support from their parents if they get into really serious financial problems, something that credit card companies rely on when they take on the risks of letting college students borrow from them.
Because college students can still get credit cards very easily right now, parents need to educate their kids about to enter college about the risks involved when they get credit cards. True, credit cards are very convenient and very useful. However, along with the convenience comes a high risk of financial breakdown.
The biggest problem with credit cards is that it is very easy to over-estimate how well a user can pay off the charges that he or she makes on it. Credit card companies also do their best to encourage the minimal monthly payments as well because this amount covers mostly interests and fees and only a minimal amount will go towards balance payments. This is known as “revolving debt” in the credit industry. Revolving debt is a boon for credit companies who see huge profits from charging interest and fees on long term debt. It is conversely the bane for credit card holders who end up paying more than what they originally loaned.
