Cash or Charge?

Cash is always going to be king when it comes to your finances

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The moment you step on campus, the sharks will be lurking. They will come bearing smiles and gifts, and all you have to do is sign up for what they are offering – usually credit cards. Offer a gracious “No thank you,” and be on your way.

Remember: A credit card is not free money; far from it. Anything you put on plastic, you have to pay back. With interest … and that could be 19 percent, 23 percent, even 29 percent every year. The interest alone can double your debt in three years. Plus there are annual fees, late fees and overdraft fees.  

Having helped thousands of Kentucky students fund their college education, the experts at the Kentucky Higher Education Student Loan Corp. – aka The Student Loan People – say the mistake many students make is paying only the minimum balance each month. The trap is that by paying only the minimum, you literally may never pay off your credit card.

So how do you keep spending, and debt, in line? Your bank may offer debit cards: They look like credit cards, but the purchase amount is immediately deducted from your checking account. To create good habits, one credit card company offers a card that your parents load with money from their checking account (like a prepaid phone card). Every time you use it, your parents get an email with the transaction details so they can help keep an eye on what you’re spending.

There are a lot of ways to get through college without racking up a poor credit history that could haunt you for years to come. To learn more, visit www.studentloanpeople.com or call (888) 678-4625.

If you’re thinking about getting a credit card as a convenience item, make sure you can pay off the entire balance each month. If not, you’re basically throwing your money into a gigantic compound-interest sinkhole.

Need proof? To pay off a credit card bill of $2,500 (the average credit card balance for undergraduate college students is $2,226), paying the monthly minimum (with no additional charges) will take 20 years and four months (at an 18% interest rate and 2.5% minimum balance). During that time, you will pay $3,365.51 in interest alone. 

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