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Taking the Next Step in Financial Responsibility: Avoiding Unmanageable Credit Card Debt in College

High school students from across the greater Rochester area recently came to Monroe Community College to attend an event put on by NextStepU, which served to inspire a successful experience at college.

April 2016

One component of the event was financial literacy and how the earlier students begin to understand their personal finances and responsible spending habits, the better the experience will be and the likelihood for a more successful, less stressful future.

Hon. John C. Ninfo, II, from the Credit Abuse Resistance Education (CARE) program presented, “How to Avoid Debt in College.” Judge Ninfo covered everything from budgeting, to student loans, to the proper use of credit cards.

There are numerous new financial situations that teenagers experience when they go off to college, and by being more informed, they can avoid the pitfalls many slip into—one of the most common being racking up high levels of credit card debt, which is what we will focus on in the first of this three-part series.

Credit Cards:

Thankfully, legislation such as the CARD Act of 2009 has been passed which has made it illegal for card companies to use predatory tactics (e.g., sign up for a credit card and get a free slice of pizza) to get students to sign up for credit cards. 

Even with laws like the CARD Act in place, college is often the first time a young adult will be using a credit card, and there is a great deal of information they should know before signing up. If credit cards are used properly, students can start to build a healthy credit history so that credit is available to them when truly needed for emergencies or large purchases like a car or a home.

In Judge Ninfo’s presentation, he recommended the use of a single credit card and to never spend more on it than students can pay off in one month. The credit card spending doesn’t just have to be for emergencies. It can be anything that students can afford because they currently have the money for it in their savings or checking account.

Using and paying for a credit card includes several terms that college students should understand if they are to do so responsibly. If you are the parent of a high school student who is preparing for college, be sure to talk with them about the following credit card terminology that will help improve their financial literacy:

  • Credit limit: The maximum amount of money the card allows you to borrow.
  • Annual percentage rate (APR): The amount of interest on your total balance amount that you pay annually (averaged over the full term of the loan).
  • Minimum payment: The minimum amount that must be paid each month to avoid defaulting and incurring a late fee.
  • Payment due date: The date by which the card company must receive your payment. A mailed payment typically needs 7-10 business days, but if the student is paying online, they need to find out how long payments take to process.

This is a lot of new information to go through with your child, but it is all valuable advice and information that can help ensure their college experience does not saddle them with unmanageable amounts of debt right after college.