Credit offers temporary fix
After paying for tuition, books and housing many college students with limited income may feel signing up for a credit card is their only option for extra living expenses.
Attorney General Dustin McDaniel recently issued an alert to provide students with tips on managing credit card use.
“Young consumers like college students should proceed cautiously in their selection and use of a credit card,” McDaniel said. “What may seem like an easy way out of financial headache now could lead to substantial long-term problems if consumers reach their credit limits or take out cards with extraordinarily high interest rates.”
Before federal law prohibited marketing credit cards within 1,000 feet of a college campus or related event, credit card marketers bombarded students with high-pressureappeals. These solicitations caused many students to take on too much debt too soon.
Bianca Mayo, philosophy and secondary education major, said she uses every possible outlet including scholarships, loans and a credit card to pay for her education.
“I use my Visa mainly for books, which run about $400 or $500 each semester; but I am big on trying to pay it back,” she said.
Mayo also works two to three jobs to cover expenses. “I do my homework during one of my jobs and stay as organized as possible,” she said.
Under federal law, jobless students may not be issued credit cards without parental approval.
Cards may not be issued to consumers younger than 21 unless the applicant has a responsible co-signer; or if they can show an independent means of repaying the debt. In addition, the law prevents gifts like T-shirts or magazine subscriptions to market credit cards to young consumers.
Graduate student Kanisha Gray said she uses her credit card to pay for summer expenses.
“Once my refund check comes in from the fall semester I use it to pay off the card,” she said.
While Mayo and Gray only use their credit cards for minimal expenses, even small amounts can be difficult to pay off.
If you are considering credit as an alternate or additional means of payment for education, McDaniel offers this advice:
Though credit card offers may be appealing, avoid accepting too many offers. Having too much credit can lead to unmanageable debt.
Submit timely payments. Consumers who are more than 60 days late on their credit card payments can face higher interest rates on their existing balances.
Avoid making only the minimum payment each month. Doing so costs more and it takes much longer to retire the debt.
Don’t run up a balance on a “teaser” rate card. An attractive interest rate offer may be temporary, and the permanent rate may be more than you can afford.
Think twice about signing up for “over-the-limit” protection. It may sound good, but it can be very expensive, especially on a smaller transactions.
Try to prevent “maxing out” on a credit card. Charging up to the limit is risky and will affect credit scores.
For more information regarding credit cards and consumer-related issues, contact Consumer Protection Division of the Attorney General’s Office at 800-482-8982, or visit GotYourBackArkansas.org.