The previous post looked into some of the opportunities and pitfalls that can occur when college students take out credit cards. This post will take a closer look at some of the possible pitfalls that can result from student credit cards.
A recent article appearing in Forbes featured an in-depth look at The Good, The Bad, and The Ugly when it comes to student credit cards. While opening a credit card account can be a good way to build credit for someone with limited credit history, it is important to fully research the card you want to sign up for to make sure that there are no hidden usage fees or overly high interest rates.
According to Forbes, a 2009 survey by Sallie Mae found that about one-third of college students put their tuition or part of their tuition on their credit cards and 92 percent put textbooks, supplies and other school expenses on their cards. Because of high and variable interest rates on cards, this can result in overpaying for college. Sometimes other options may not be available, but a better option would be a government loan or a Pell grant.
The Sallie Mae study also found that undergraduates have an average credit card debt of $3,173. Students should be careful not to have too many cards because keeping up with even minimum payments can be difficult on a student budget. Students should also be skeptical of credit card offers aimed at them. According to Forbes, credit card companies purposefully target college students because new users are the most profitable customers in terms of having to pay finance charges, late charges and other fees.
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