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Focus Archive > Safety for College Students > Money and Credit 101
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Consumer Focus: For College Students |
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Money and Credit 101
 Unfortunately, you can’t register for Money and Credit 101 when you go off to your university or college. There is no such class, but perhaps there should be. College students often find themselves in over their heads with credit card debt, or in situations where they’ve been scammed out of money. You can avoid these traps by following the advice below when you “shop” for credit cards, apartments, financial aid, and travel opportunities.
According to a National Consumers League study, 63% of teens say they get most of their information about money and credit from their parents. So parents, this article is for you, too. Set a good example by managing money and credit wisely.
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Credit Cards
The National Consumers League study also found that 58% of teens plan to get their first credit card sometime between turning 18 and graduating from college. Since the amount of time college students have available to earn money is usually limited, be careful not to rack up those credit card bills. Even if you have a part time job, credit card payments may eat up a significant portion of your income.
- Credit card interest rates can be as high as 18%. At this rate, if you have a $2,500 balance, you are paying $450 a year in interest. While paying the same amount each month (say $100) is admirable, it will take you two and a half years to pay off the interest and balance in the above example. Think about a purchase before you make it, and ask yourself if it’s really worth it. Consider using your credit card for emergencies only.
- Watch out for card issuers that raise your interest rate if you make late payments. For example, if you make 2 late payments within 6 months, the card issuer may raise your interest rate from 18% to 24%.
- Look for a low interest rate when shopping for a credit card. If the rate is introductory (lower for a certain amount of time), take note of when the rate will go up and by how much.
- Annual fees can range from $20 to $300, so look at those as well. You may have to pay the annual fee whether you use the card or not.
- With each credit card, compare the late payment fee, any fees for cash advances, as well as the fee for going over your credit limit.
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Renting an Apartment
 Don’t want to stay in the dorms? When renting an apartment, you (and your potential roommates) need to keep the following in mind:
- Financial experts say that your rent should be no more than 25-30% of your income.
- If you use a real estate agent or an apartment locator service, be prepared to pay one month’s rent for their services.
- The security deposit may be the equivalent of one or two month’s rent.
- Consider purchasing renter’s insurance. It is relatively inexpensive and could protect you from losses in the event of fire or theft.
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Scholarship Scams
- Beware of unscrupulous companies that “guarantee” to get you scholarships, or that award scholarships in exchange for an advance fee. Others tell students they've been selected as "finalists" for awards that require an up-front fee.
- Walk out of high pressure sales seminars where you're asked to pay immediately after the pitch or risk losing out on the "opportunity." Talk to a guidance counselor or financial aid advisor instead. You may be able to get the same help for free.
- Don’t do business with a company that asks for your checking account number to "confirm eligibility." They may debit your account without your permission.
- Watch out for these sales pitches:
- "The scholarship is guaranteed or your money back."
- "You can't get this information anywhere else."
- "I just need your credit card or bank account number to hold this scholarship."
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Travel Tips
 College students often fall prey to spring break travel scams. Heed these warnings from the Federal Trade Commission when making your vacation plans.
- Faxes, phone calls, and emails often promise great vacations at rock bottom prices. But be wary; reputable companies don’t need to go to such measures to get business.
- If you are told deposits are refundable, get it in writing. Same goes for the cancellation policy, as well as what free items (such as meals) you have been promised.
- Don't accept vague terms such as "major hotels.” Get the names, addresses and telephone numbers for the lodgings and airlines you'll be using. Call to verify your reservations and arrangements.
- Before making any payments, check out the company with your state’s consumer protection office. These offices conduct investigations and prosecute offenders of consumer laws. If you’ve already been scammed, they may mediate your complaint and recoup some of your losses.
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Other
Resources
This is just a brief overview.
For more information, check out these resources:
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