Uninformed Students Have Highest Risk of Credit Card Troubles

October 20, 2012

There's no doubt about it, going to college is expensive. Between rent, food, books and the ever-increasing price of tuition, many Texas students find it hard to make ends meet. Since few students have the time to work as many hours as it would take to support themselves and still do well in school, many go into debt to pay the bills. When student loans don't provide enough support, they turn to credit cards.

Although credit cards can be helpful for college students, they can also be very dangerous if not used carefully. A few mistakes or missed payments could start them on the path to bankruptcy, especially considering that students tend to have low incomes and few assets.

The risk of credit card misuse is highest among students who have not been taught about consumer debt. A study recently published in the Journal of Family and Economic Issues showed that students with the least credit knowledge are twice as likely to have a maxed-out credit card as students with "midlevel" knowledge. In turn, these midlevel students are much more likely to take credit risks -- like maxing out cards, missing payments or taking out cash advances -- than students with the most knowledge.

In response to these findings, the study's authors argued that both schools and parents need to do more to teach students about credit cards. Simply expecting young adults to manage their finances isn't enough. Instead, they need hands-on experience about what it is like to earn, spend and keep track of money.

Credit Card Tips for College Students

College students who use credit cards would be wise to take some time to learn how to avoid credit risks. They can start by reviewing the following tips:
- Don't apply for cards you don't need: Most people don't realize that each new credit application takes a chunk out of their credit score. So, while it may seem like a good deal to get a 10 percent discount by applying for a store credit card, the short-term savings are likely not worth the long-term damage.

- Cards aren't the same as cash: Keep cards for emergencies, but don't use them for daily expenses. It's too easy to accumulate a big balance without realizing it.

- Factor in interest: Do the math before making a big purchase. Understand how your interest rate works and factor that into the ultimate cost. Paying the bill in full every month can help you avoid interest payments.

- Pay on time, every month: Even one late or missed payment can cause your interest rate to skyrocket. Your credit score will take a big hit as well.

- Ask for help: If you find yourself getting in over your head, the worst thing you can do is let the problem fester. Talk to your parents, your advisor or another trusted adult who can give you advice on how to move forward.

Students who run into serious trouble with their credit cards would be wise to seek the counsel of an experienced attorney. A Texas bankruptcy attorney can help students identify and pursue the best strategies for managing their debts.

Article provided by Davis Law Firm
Visit us at www.myaustinbankruptcyattorney.com