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How Not to Handle Credit Cards in College

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Millions of young adults just graduated from high school and are in the final stages of preparing for college, and that might mean having access to credit cards for the first time.

But for those who have never used a credit card before, getting accustomed to the kind of spending flexibility they provide can take some work, and may ultimately be quite costly. This is because inexperienced credit card users are more likely to make missteps when using the accounts to pay for any number of things than those who have been managing them for some time.

One of the largest mistakes many college kids may make when they have a credit card – either one in their own name co-signed by their parents, or become an “authorized user” on an existing account – is that they simply spend a significant amount on it in the first few months they have the account and start accruing interest charges. Further, many might not understand all the pitfalls that come with missing a payment, even if it’s just by a single day.

For this reason, it’s important for adults to sit down with their soon-to-be college student and explain to them all the various ins and outs they might run into during the course of their regular credit card use. This includes the pitfalls of spending too much money on the account in a relatively short period of time, carrying balances over from one month to the next, maxing out cards, missing payments, and so forth. Further, it should also involve an explanation of how these types of mistakes can have an effect on the other person who controls the card as well, in addition to a general description of how these will change their credit rating.

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Many college kids might not know much about credit standing and how it affects many aspects of their lives both in school and after they graduate, but having an understanding of these issues will be crucial to their having some financial wherewithal when they attempt to live independently. The average college graduate now has tens of thousands of dollars in debt to their name, through education loans, auto financing and credit cards. All of these can be a significant hindrance to achieving financial independence.

Image: Ed Yourdon, via Flickr

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