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Reasons You Should Handle Credit Cards With Care in College

by Barbara Marquand

If you talked your parents into cosigning for credit cards, then you might have been lectured about the dangers of college credit card overspending. You know to pay bills on time, use credit cards only when necessary, keep balances low, charge only what you can afford and avoid staggering credit card debt.

Yeah, yeah, yeah.

You know the instructions for wise credit card use. Now, here are 5 reasons to follow those instructions:

1. Get a Car After College

You build a credit history when you have credit cards, and that history is checked when you apply for car loans. Good credit ratings come from paying all your bills on time and keeping balances below 30 percent of credit limits. The better your credit history, the better your chances of getting approved.

2. Avoid Icky Credit Report Confrontation

How you handle credit card accounts also affects the credit rating of your parents, or whomever cosigned. If you screw up by paying bills late or skipping payments, those mistakes show up on their credit reports as well as yours. They'll find out when they apply for loans and don't qualify for the best rates.

3. Impress Employers at Graduation

Many employers check applicants' credit reports, figuring people who manage their money responsibly are likely to handle jobs well. Don't risk losing out on a great opportunity by misusing credit cards.

4. Avoid Paying for Credit Card Splurges When You're Married with Kids

Credit card debt has a sneaky way of adding up if you keep spending and pay only the minimum due each month. The average senior graduates with more than $4,000 of credit card debt, according to the latest Sallie Mae survey. If you paid only the minimum due on a $4,000 balance, it would take several years, even more, to pay it off, depending on how your minimum payment is calculated. Check your credit card statement, which gives a snapshot for how long it would take to pay off the debt with minimum payments, and provides a dollar amount to pay every month to get rid of the debt in three years.

5. Less Credit Card Debt = More Spending Money

You avoid expensive interest if you pay off your balance in full every month, and you avoid late fees if you pay on time. That means more money in your pocket for books, tuition, and a little fun now and then.

Use credit cards to your advantage in college, and you're well on your way to building a solid financial platform for the rest of your life.

Published 05/31/11 (Modified 11/10/11)

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