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248-488-0419
GREENPATH DEBT SOLUTIONS OFFERS BUDGETING AND CREDIT CARD
SURVIVAL TIPS FOR COLLEGE STUDENTS
Farmington Hills, Mich. August 11, 2003 - With an average credit card debt of $3,000, graduating college students appear to be following the current consumer trend toward deeper debt, according to a national student loan survey conducted by Nellie Mae Corp. The report stated that in 2002, students who used credit cards to finance part of their undergraduate education left college with a $3,400 credit card balance, compared to an average balance of $1,600 for most students. The study showed that those who used credit cards to pay for part of their education had an average undergraduate education loan debt of $21,200, almost 20 percent higher than average undergraduate education loan debt of $17,700 for those who did not rely on credit cards.
GreenPath Debt Solutions, a nonprofit organization that provides customized solutions for improving financial situations, offers college students money management survival tips for maneuvering through the decision-making maze when considering the use of credit cards.
"Credit cards can be helpful for students who use them wisely," said Courtney Scruggs, public relations specialist for GreenPath Debt Solutions. "What is paramount when using credit is understanding how best to manage credit and debt. And it's usually a good idea to consult parents or guardians before signing up for or using a credit card for large debts. They are the often the ones who end up paying the bills when students can not."
By applying the tips below through college years and beyond, students can gain insight into managing their finances more effectively.
· Before you sign.keep this in mind: Credit card purchases are loans to pay for products and services. When signing for a credit card, the customer agrees to repay the loan(s) according to the creditor's rules, which comes with conditions such as "pay late and pay more." A customer's record of payment is reported to the three major credit bureaus and this payment history becomes the basis for determining credit scores. For students who are unable to repay their credit card debts on time, its best to decline credit card offers and steer clear of negative credit profiles that will cost them more money in the future.
· Is that "free gift" really free? A 30-day free Internet account or free tee-shirt may not be a bargain if you have to sign up for a credit card with an annual fee, monthly fees and high interest rates. Solicitations like these can lead to multiple credit card accounts that can easily overextend a college student's budget. Think twice about these quick offers and read the fine print on those applications for credit obligations that you may not be able to meet.
· Know the difference between a credit card and debit card: While both may carry the VISA or MasterCard logos, they're considerably different. With a credit card, customers borrow the money from a third party to buy now and pay later. A debit card transaction removes funds directly from customers' bank accounts, so they buy now and pay now. Students can avoid mounting debt and stress by not spending money they don't have and can't afford to repay immediately.
· Find the best rate - credit cards are not created equal: Read the fine print in the marketing material or contract that explains the interest rate and penalty rates that may apply. For example, a zero percent interest rate during an introductory period may easily rise as high as 20 percent or more, once the period ends. Know the length of time before an introductory rate expires and avoid late payments and high balances which could cause a spike in the interest rate. Visit websites such as www.bankrate.com and www.cardweb.com to compare rates.
· Know the fees: Be careful to review whether an annual fee, monthly fees and penalty fees (late and over-the-limit) are associated with a card account. If an account has a high balance, adding a monthly or annual fee could result in balances beyond the allowable limit for the card, which could result in additional penalty fees averaging $30 per billing cycle until the account is brought within spending limits. Understand when other actions, such as late payments, will invoke additional fees resulting in a ballooning balance that could be difficult to pay. Be sure to pay credit card bills on time and apply extra payments to reduce the debt amount.
· Be selective with purchases and keep a low debt level: Be selective with credit card use and be sure to save room for unplanned necessities and emergencies. After charges have been made, balances should be paid off as quickly as possible; doing so will cost less money in the long run. For example, if $1,000 is charged on a credit card with an annual percentage rate of 17 percent and a minimum payment of $25 is made, it will take 5 years (60 months) to pay off the loan. Ultimately, almost $500 will be paid in interest alone. By increasing payments to $50, it would take 24 months to pay it off with just over $180 in interest charges.
· Avoid becoming a victim of identity theft: Students should obtain their credit reports at least once a year to verify that the information reported is accurate. Avoid exposing credit cards, social security numbers and other personal information to others. If a credit card is lost or stolen, be sure to report it to the credit card company right away and ask for a written list of the latest charges to verify authorized purchases. Unauthorized charges should be disputed in writing.
· Consult trained credit counselors to learn more about money management: It's never too early to learn how to avoid money management and credit problems. Contact a trained, certified credit counselor by calling 866-648-8122 or visit www.greenpath.com for information to get a confidential assessment of your financial situation. GreenPath Debt Solutions offers free and affordable services to everyone.
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