For Your Student: Handle Credit Wisely
Students are heading back to school, and many are armed with their first ever credit card. While they may start off with the best of intentions, occasional splurges can turn into regular spender-benders as they dine out and shop for the latest fashions and electronics. Talk to your student about smart spending before a few big purchases—flat screen TV for the dorm, anyone?— make a major mark on their credit.
“As college students work toward their professional goals by obtaining educational degrees, we urge them to also consider their financial future and the role that credit plays in helping them achieve their personal and professional goals,” says Jeff Gerhart, chairman of ICBA and of Bank of Newman Grove, Neb. “The fact is that no one may ever need to see your transcript after you leave school, but your credit report will be with you for the rest of your life.”
New rules governing credit cards aimed specifically at protecting students went into effect in 2010. According to these rules, credit card companies are prohibited from issuing cards to anyone under the age of 18, and those under 21 need either an adult co-signer or proof of income. Educational institutions must disclose any agreements they have with credit card companies that market to students, and credit card companies may no longer entice students with free gifts. All other provisions in the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act that cover consumers—such as advance notice of changes, more time to make payments and terms that are easier to understand—apply to students as well.
Even with these safeguards, the best protection against getting deeply in debt is knowing the pitfalls and how to avoid them. ICBA offers the following tips to help students use credit cards wisely:
• Set up and follow a budget that includes paying off a credit card balance. “Maxing out” or charging up to your card’s credit limit can make sticking to your budget more difficult.
• Remember that cash advances, unlike purchases, generally have finance charges that apply immediately.
• Pay on time, every time. Whenever possible, pay more than the minimum payment owed (for example, 150 percent of the minimum) to pay off the balance faster and save on finance charges.
• Keep records of your account number, expiration date and the phone number of your card issuer in a safe place.
• Keep your account information confidential.
• Never give out your credit card number, card verification number (which appears on or near the signature panel) or expiration date over the phone, unless you initiated the call and know who you’re dealing with.
• Elect to receive your statement information online. Many sites offer an alert for unusual transactions and reminders of when your bill is due.
• Consider making your credit card payment online to ensure it is received by the monthly due date.
• Routinely access your account information online to track your spending and to quickly identify fraudulent transactions. If you see a transaction that is not yours, notify your card issuer immediately.
• If there’s an error on your account, report it immediately by notifying your card issuer. Look for complete instructions on your monthly statement or your bank’s website and follow them carefully to protect your rights.
• Keep a copy of your sales receipts so you can compare what you bought with the charges on your bill.
• When making online transactions, be sure the site is secure. Don’t let others see you enter card information.
• Don’t lend your credit card to anyone, not even a friend. Ever.
• If you move, notify your card issuer immediately.
• If you encounter financial difficulties, contact your card issuer as soon as possible.
Source: www.icba.org. / RISMEDIA