4 Keys for Smart Credit Card Use

(Originally appeared in Elevate U, Al's column/blog for The Black Collegian Magazine)

In Plastic We Trust: 4 Keys for Smart Credit Card Use

With a credit card here and a credit card there…here a card, there a card, everywhere a credit card. Old MacDonald had a card. E-I-E-I Oh my God! This has gotten out of hand. Most people, especially college students, are constantly being swarmed with credit card offers.

When is the last time you received a credit card offer? Yesterday? Last week? Or maybe it was sometime within the last month.

Did you know…

…that the average household receives around 8 credit card offers per month?

And that’s nothing compared to the amount of offers college students receive. According to research, the average college student receives 15 credit card offers per week via snail mail, email, and various promotions (i.e. being offered a store credit card during check out). That’s more than seven times the number of offers received per household.

With all of these credit cards all over the place, it’s easy to understand why 76% of undergraduates have at least one credit card. The problem is- the vast majority of credit card holders blindly accept credit card offers. Smart credit card use requires…

1. Awareness

Know why you’re getting it, what it’s good for, and the consequences of poor usage.

These are the primary things that credit cards are good for:

*Helping to build credit history

*Emergencies

*Necessities

And of course…

*Niceties. Like a flat screen or a hot new outfit, right? WRONG.

I’m not saying that you need to wear corny clothes and bobo’s (that’s what we call no-name sneakers in Philly) but you want to read the rest of this article before heading off to the mall.

CREDIT HISTORY

Consistently making your credit card payments on time can help you to establish a good credit history which will increase your credit score over time.

The highest credit score you can have is 850; the lowest is 350. Above 700 is considered excellent. Lower than 500 is considered poor. The better your credit score the lower your interest rates will be on loans and future credit which means that, in the long run, you’ll owe less money. Your monthly mortgage payments and car note will be lower.

EMERGENCIES

Emergencies are self-explanatory. If a piano falls on your head and you need to buy some pain medicine, that’s an emergency.

NECESSITIES

Just because something is important to you doesn’t mean that it’s a necessity. But here’s a tip: If you have to ask whether or not something is a necessity, then chances are it isn’t.

CONSEQUENCES

Make sure that you’re aware of the consequences of poor credit card usage. This is where I failed miserably.

When I received my first card during my first semester in college, I wasn’t aware of anything about credit cards other than knowing that I could use them to “get stuff now and pay later.” I found out, in painful fashion, that pay later really means pay MORE later!

I maxed out my first card in about 10 days (predominantly buying stuff I didn’t need and a few text books) and I didn’t have the money to make the payments.

Dumb.

Within two weeks of receiving the first card, another company sent me a card. I maxed out that one in 10 days, too. How? Buying more stuff I didn’t need (clothes and fast food) and trying to use cash advances to make payments on the other card!

Stupid.

Within in 90 days of getting my first credit card I ruined my credit and had to drop out of school because of debt.

Idiot.

Did you know…

…that university administrators complain about losing more students to credit card debt than academic failure?

Because more and more organizations and institutions are doing a credit check on candidates, excessive or delinquent credit card debt has been known to lead to job and professional school rejection.

Family conflicts, difficulty renting apartments, loan denials, physical and emotional health problems, and, in extreme cases, even suicide have all been attributed to excessive credit card debt.

The way to avoid scenarios like the ones I just mentioned is to practice…

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