Regional College Access Center

Personal finance tips

Amy says: I signed up for a credit card as soon as I got to school. I didn't go crazy with it, but I did notice the balance creeping up a little bit from month to month. Eventually I realized that Christmas and birthday money weren't going to cover my regular expenses... plus fun stuff... and I decided to get a job on campus.

Credit cards 101

When you get to campus you will see many banks and other organizations offering credit cards to students. Think twice before you decide to apply for one. Credit cards can get you into major money problems—we're talking up thousands of dollars in debt. Racking up charges that you can't pay back is also a good way to ruin your credit for years to come. Imagine applying for a loan on a car years in the future and finding out that you'll have to pay more money because you didn't manage your money right when you were in college!

There are some good reasons to consider a credit card at some point in your college career, however. For example, using a credit card for small purchases and paying it off every month can help you build a good credit record. If you do decide to apply for a credit card, don't take the first one that comes along. Different cards have different strengths and weaknesses. Here are a few things to ask about:

  • 1) What's the interest rate?
    An interest rate determines how much you have to pay if you don't pay off your card in full each month. They're also called "annual percentage rates," or APR. High interest rates can quickly increase the amount you owe, so this is one of the most important things to find out about. As a student without a credit history, you might not be able to get a good interest rate. As a general rule, a 20% interest rate is high, and a 14% rate is about average. If a card has an interest rate much higher than 20%, run away screaming. They're trying to take advantage of you.
  • 2) Are there other fees?
    Some credit cards charge monthly or yearly fees just to have the card. Others charge fees on top of the interest rate for balances that you don't pay off on time. Most cards charge very high fees and interest rates if you withdraw cash on your credit card (using it like a debit card). Make sure you understand these fees and are able to pay them, or better yet, avoid paying them!
  • 3) How much credit do I have?
    Every credit card account has a "credit limit," which is exactly what it sounds like: the maximum amount you can have on the card at any one time. Your first impulse might be to look for a card with a high credit limit, so that you're not in danger of running out of credit. That's not always the right move, though. Until you get used paying off your balance and managing your expenses, you should look for a card with a reasonable limit—less than $1000 is a good place to start. Credit card companies are often willing to raise the limit when you ask, especially if you're a good customer, so there's always room to grow later on.

Planning a budget

Have you ever planned out a budget for yourself before? If not, you might try asking your parents or guardian for help. They've got years of experience balancing a budget, and they'll probably be delighted that you're being so responsible. You're responsible for your own expenses now, and you can't afford to just assume everything will balance out.

Make sure you budget the fun stuff. You'll be meeting awesome new people, maybe even exploring a brand new city (or even country). You'll get a lot of invitations to go out and do things. Going out costs money! Plan on spending cash for dinners, movies, or whatever it is that you like to do. If you're consistently over budget, you might need to reevaluate your regular expenses, or else skip the fun once in a while. You social butterfly, you.

Earning and saving

You many even need to find a job for some extra income. Lots of students do. Start by checking with your school to see what posistions are available on campus. On-campus employers are usually convenient, and understanding of your class schedule. A part-time job is a good place to start, to make sure you can fully balance your class load with your work load.

College is a good time for you to start saving money. This rule applies to everyone, but especially those who opted to take out a loan. After graduation, you'll need to start paying that loan back—and you might also have to pay for a move and a new apartment. You don't have to eat ramen noodles twice a day, but try to get in the habit of slowly and consistently putting away some of every paycheck in a separate savings account.

If you're going to school close to where you lived with your parents or guardian, consider living with them for a while longer. Sounds thrilling, right? But you can really do yourself a favor by staying at home. (And your family loves you! Probably.) Life after high school is expensive. If you just can't stand the thought of being at home a minute longer, finding a trusted roommate or roommates can also help keep your costs down.