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Financial Tips

Consumer Credit : Free Credit Card Giveaways


Is a Free Giveaway Worth Thousands of Dollars in Debt?

Each year, credit card companies target college students with promotional offers. Sign up for a credit card, the representatives announce, and receive a "free" gift! What could go wrong? After all, there's no obligation for signing up. And, establishing a credit history sounds like a fairly responsible thing to do, right?

Well, yes and no. As with anything, there are right and wrong reasons for making decisions when it comes to personal finance. As the money management professionals at Credit Counselors advise, it's always beneficial to understand what you're getting into before making any commitments. Impulsive decisions may seem relatively harmless, but irresponsible credit use can lead to trouble quickly. In no time, that "free" MP3 player could cost you several times what a similar model might sell for.

If you're skeptical, consider that the average credit card balance of college freshmen is $1,500 (for those 40+% of students with cards). By their senior year, the figure is nearly $3,000. And by graduate school, the figure nearly triples, topping $8,600! That's quite a lot of debt to acquire for a free giveaway.

As such, if you're a college student, take the advice of Credit Counselors:

  • Try to resist making impulsive, reactive decisions when it involves credit cards. If you truly need a card, shop around for the best rates and benefits instead of signing on for the free giveaway.
  • Understand the terms and conditions of the card you select. The fine print on a credit card agreement can be extensive. It outlines your credit limit, the APR, grace period policies, minimum payments, late fees, cash advance rates, rewards programs, and much more. Listing these items side by side will help you compare offers to select the one that best fits your needs.
  • Be responsible when using your credit card. It's easy to forget just how quickly small, impulsive purchases (meals, snacks, etc.) can add up.
  • Avoid cash advances at all costs. These generally incur significantly higher interest rates that can snowball into real credit nightmares if not paid off quickly. If you absolutely must take a cash advance, be sure to understand fully the related costs and payment deadlines.
  • Never miss payments. As mentioned above, the upside to having a credit card includes establishing a credit history for later in life when you'll be in the market for a car, job, house, etc. If you pay your bills on time (and routinely make more than simply minimum payments), you're setting yourself up for success. Fail to do so and your mistakes can follow you for years to come.
  • Keep your future in mind. Once you graduate, you may have student loans to pay back. You'll also likely enter the workforce and need an apartment, new clothes, and a car. Having substantial credit card debt could seriously affect your ability to pursue these things.
  • Live on a budget. You should be able to put together a reasonable estimate of your costs during college. Books, tuition, housing, and meal expenses are fairly easy to project. By looking ahead, you may realize that you'll need more money to make ends meet. Consider a part-time job, search for available grants or stipends, or talk with your parents. Any of these solutions is far preferable to carrying credit card debt.
  • Finally, don't rely on credit cards for tuition payments. In almost all cases, better options exist. A trip to your school's financial aid office is a wise investment of time! You may be surprised at the grants and loan programs available.

Many students begin relying on credit cards for social reasons. However, seemingly harmless activities like purchasing new clothes, dining out, and making small impulse purchases can accumulate surprisingly fast. It's much better to avoid becoming one of the statistics quoted at the beginning of this article.

As a college student, you likely have more free time now than you'll have ever again. Use some of that time to get a job so that you can pay for these small pleasures with cash.

If you're already struggling with credit card debt, contact a debt management counselor at Credit Counselors. We may not offer you a free MP3 player, but our advice will be music to your ears.