Spending with Credit Cards

 

Credit Cards
A credit card is pre-approved credit which can be used to purchase items now and defer payment until later. It is essentially a loan on your future earnings. The longer you carry a balance, the more you pay for the 'loan' and the total price of the goods or services. Credit terms and conditions affect your overall cost. It is important to compare terms, fees, APR and total finance costs before you agree to open a credit or charge card account. Credit cards can assist you with money management. However, if used improperly they can cost you huge sums of money.  Need help choosing a credit card?

Try our Credit Card Calculator to see how long it takes to pay off your card balance.

Making purchases with a credit card can seem like a good idea.  Credit cards are convient. You can buy an item you need now and pay for it later.  It is easy to spend money for items that you want, but don't really need.  Before you purchase an item using credit, make sure that it is something that you need and that you have a plan in your budget for paying your credit card balance off.  Acquiring a large amount of credit card debt while you are in school can have huge consequences for the rest of your life.

According to NCES 24.5% of first and second year college students will leave college without graduating.  Forty two percent of those students will leave for financial, not academic reasons.  According to a survey conducted by SallieMae in 2007, one in three college students graduate with $10,000 or more in credit card debt.  Making smart decisions about credit cards will make it easier for you to stay in school and for you to live the kind of life you want after graduation.

If you have to make a purchase using a credit card, here are some tips for helping to keep that expense under control.

 

S - Specific

  • Know exactly which items you need to purchase with a credit card, and plan in advance for  the  purchase.
  • Know the interest rate that your credit card company will charge you for the purchase.
  • Know the balance due on your credit card and your monthly payment amount.
  • Have a plan in your budget for paying your balance in full.

M-Measurable

  • Your plan should include a way for you to measure your progress.  Find a way to keep track of your progress that will work for you.  The feedback you get from watching your balance go down will help inspire you to to continue working toward your goal.

A - Attainable

  • Set a payment amount based on your budget that will allow you to make steady progress.  If you set your goal too high or too fast you could get discouraged.

R - Realistic

  • Do not set yourself up for failure.
  • Use your budget to determine how much income you have, and how much you can spend.

T - Time Based

  • Set a date for when you will be able to pay off your card.
  • The sooner you are able to meet your goal, the easier it will be for you to stay on track.