Student Loan Dodgers

Getting your first credit card is a significant event in the lives of most students. Unfortunately, most students don’t have much experience in the way of managing finances, so what seems like a great deal to start out with can quickly turn into a financial nightmare.

A credit card is really an unsecured loan by the card issuer to the credit card holder, or borrower. The issuer usually grants the borrower some grace period of anywhere between about three to four weeks to repay the balance due after the lender’s statement has been issued. If the borrower repays the loan immediately, the loan is interest-free.

The credit card statement contains a list of all of the charges the borrower has made since the last statement. It also contains the date on which payment is due, and the minimum payment the lender expects to receive. If payment in full is not received, a finance charge is tacked onto the purchases the borrower made during the statement period.

If the borrower accumulates unpaid charges over several months, the interest accumulates on previous purchases. Eventually, if insufficient payments are received or enough charges are accumulated, the borrower will reach his or her credit limit and the lender will not extend further credit to the borrower. The only way the borrower can get more credit is to pay back the amount owed.

When you have a credit card, it’s very tempting to use it to pay for things you don’t have the money for right now. This is a great way to get yourself into some long-term trouble, and jeopardize your credit history for several years to come. Credit card information (good and bad) stays on your credit history for seven years. Really bad information (a bankruptcy) stays on your credit history for ten years. Your credit history determines whether you’ll get additional credit cards, personal loans, a new car loan, a mortgage, good insurance rates, and in some cases, a job.

Take good care of your credit cards and use them to establish a good credit history. Don’t use your credit card to purchase things you don’t have the money for now. It’s a set-up that could negatively affect you for years to come.