Consumer Credit Counseling Service Information Library Student Zone

Livin' Large While You Charge

The free spending that credit cards allow can let you do crazy things. It can make buying dinner for you and 10 of your closest friends seem like a fabulous idea. It can make a vacation just a card-swipe away! Just remember that you DO have to pay it back. All lenders (except maybe dear old Mom and Dad) make you pay back what you borrow – plus interest!

Reality Check

Say that you charge just $500.00 on a card that charges 23% interest and you just pay the $10.00 minimum each month. Guess how long it would take to pay it back. It would take nearly 14 YEARS and cost almost $1200.00 in interest! Is whatever you are charging worth 14 years of payments? Do you think you willl still be using it, or even recall what you bought by the time it’s paid off? Think about it!

Dodge the Debt Trap

It is important to build your credit but just make sure you don’t end up deep in debt.Try these tips to shop smart:

• Before you buy, ask yourself “Do I need this or do I just want this?” If you just want it, can it wait until you have the cash?

• Don’t carry credit cards. You are much more likely to fall prey to impulse buying if you keep the cards handy.

• Really think about what you are buying. Would you spend as much if you had your hard-earned cash to buy it?

• Start saving now! If you start saving $2000.00 per year from age 22 to age 30 at about a 9% return and never save another dime after that, you will have saved $580,000.00 saved when you turn 65. If you wait until you are 30 to start saving, you will have to save $2000.00 every year until you are 65 and you will still only have $470,000.00 saved at a 9% return. To get 9% or better, you may want to check into purchasing a Roth IRA.

My job will save me!

If you are thinking “Hey, I will pay off my credit cards with that great job I am going to get after college.” Guess again. Even if you have the best intentions and take all the steps you need to take in finding your first job after college, it could still take months before you find the job for you. You may need to take a lower paying job to gain experience. During this time, your student loans could begin coming due, and money needed to pay your creditors could become scarce! This could force you into serious financial distress. In fact, statistics show that people age 25 and under are currently the fastest growing group in bankruptcy filings.