College is a time when young adults experience tons of new freedom and responsibility with limited supervision. The result can be loads of debt after being tempted with the seemingly free money that comes with credit card offers and student loans. If you’re moving away from home for the first time, it’s important that you adopt smart habits when dealing with money. Living in the moment may seem like a good idea now, but you don’t want to end up putting yourself in financial crisis before you start earning a real salary.
You might have received a lecture from your parents after you received those credit card offers in the mail around the time of your 18th birthday. The best thing you can do is heed their advice. Having a credit card is a double-edged sword – although you get immediate gratification with the ability to purchase anything you want, you’ll likely have to face high interest payments. Interest is a percentage based on the amount of money borrowed. In addition, card holders have to pay additional charges like annual membership fees, phone and online payment fees, fees for exceeding your limit and late fees for missed payments. Credit card companies make profits off of college kids because they know most are ignorant of how the process works. Now, this doesn’t mean you absolutely shouldn’t have a credit card. It can be useful during emergencies when you’re out of options. If you have one, be sure to read the fine print and pay it off every month. The positive is that you’ll build a good credit report.
Another common way of getting into debt is by taking out student loans – especially private loans from banks like Chase, Wells Fargo and Bank of America. They require you to have a co-signer unless you have steady income and good credit, and like credit cards, usually come with high interest rates and additional fees. If you must borrow from a private lender, take the minimum amount possible and just use it on tuition, fees and room and board. It can supplement what you’ve received from your federal loan, which has a lower interest rate and lower fees. When faced with managing money in college, it’s best to keep it simple – live within your means and don’t go crazy spending money you don’t really have.