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What Should High School and University Students Know About Credit and Debt

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Learning About Credit and Debt When You’re Young

Many people don’t learn about budgeting, credit, and debt until they’re adults. Unfortunately, if you’re not responsible with your money when you’re young, you can get into debt trouble that could follow you for many, many years.

If you fall into debt just out of college, for instance, that will make it more difficult for you to successfully manage your finances when you’re out in the working world. Having a large amount of debt makes it hard to get – and pay for – an automobile loan or a mortgage. If you have large debt payments to make each month, you’ll have less money available for other aspects of life. Getting into debt trouble when you’re young can mean you’ll have to delay various life milestones until you’re older and have more money.

Getting a Credit Card in School

The university years are often the first time many people get their own credit cards. In fact, credit card companies often visit college campuses and offer incentives to students to get them to sign up. This is because a person can qualify for their own credit cards and loans when they turn 18, and lenders want to sign people up as soon as possible.

There are benefits to getting a credit card when you’re young. When used responsibly, a credit card can help you improve your credit score and build a strong credit history. Lenders like it when someone has shown they can make purchases and repay their debts on time. A stronger credit history makes it easier for you to get new loans in the future and receive a lower interest rate when you do.

However, if you are not responsible with your credit card and use it to make purchases you cannot afford, you can quickly get into trouble. It’s easy to lose track of your spending or fall behind on bills, especially if it is your first time having your own credit card. Credit cards typically charge very high interest rates. This means that if you charge too much on the card and aren’t able to pay off your balance each month, you’ll end up paying a lot extra in interest.

If you miss a payment, not only will you be charged interest and a penalty, but you’ll also hurt your credit rating. Lenders are very hesitant to lend to people who cannot pay their bills on time.

Having Good Spending Habits

It’s critical that young people learn about credit cards, debt, and paying bills before they sign up a credit card. It’s very easy to get a card, but it’s tough to use one responsibly. Here are a few things you may want to know before you get your first credit card:

  • How to track your spending
    • When you’re using a credit card to pay for purchases, it’s very easy to forget how much you spent. However, losing track of purchases can be disastrous. The last thing you want is to look at your bill at the end of the month and be shocked by how much you spent. This is how you get into debt trouble.
    • It’s important that you track your spending when you’re using a credit card. Whether you use an app, a spreadsheet, or a pen and paper, make sure track everything you buy. Your credit card provider may give you a way to track your purchases online, but you’ll want to do your own tracking as well to be safe.
  • How to remember to pay your bills
    • Your bills will likely not be due at the same time each month and they will likely not be for the same amount each month. This is especially true for credit cards. This can make it easy to forget a payment or to make an incorrect payment.
    • To avoid missing payments, you’ll need to come up with a way to remember to make them. This could mean writing them down on a physical calendar, putting reminders in your phone, setting up notifications online, or various other means. Find a method that works for you and stick to it.
  • How interest works
    • Calculating how much interest you will have to pay on your credit card can be difficult. However, it’s important to understand the basics. Essentially, if you don’t pay your full credit card balance by the due date, you’ll be charged interest. Interest rates will vary, but credit card statements must legally indicate how much interest you are being charged.
    • Your credit card company will require that you make a minimum payment each month. However, making this payment just means that you won’t be charged a penalty for a late payment. If you only pay the minimum, you will be charged quite a lot of interest and it will take you a very long time to repay your debts.
    • While you should at least make the minimum payment if you’re not able to pay off your balance in full, increasing your payment by even a small amount will reduce the amount of interest you’ll be charged and shorten the time it will take you to pay off the balance.

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