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Credit Cards

Brooke Wilson gives advice on how to avoid debt.

By Brooke Wilson

Credit cards and college…the two don't mix. For me, it started out innocently enough. I would charge a few CDs here, a pizza dinner there, that cute new Puma jacket. After the initial glee of having what I thought was financial freedom, I realized that I had run up my credit card bill to a semi-obscene amount. As you can guess, I couldn't pay that semi-obscene amount and the company started to hound me.

After a recent run in on the telephone (yes, they will call you again and again and again) with an exceptionally dimwitted debt collector, I came to the conclusion that it was important for me to share my experience with credit cards for the uninitiated masses.

For those of you who are going to college this fall, you will initially be really excited about the fact that at 18 years old, some big company trusts you with over 500 dollars. In the meantime, neither your family nor closest friends would trust you with much more than a 20. The first thing you have to understand is that credit card companies are targeting you, a young naïve college student. There are applications for credit cards on virtually every college campus, sometimes in telephone booths and even in classrooms.

Companies know that as someone who is in school, you will have several financial wells to draw from (however shallow they may be), including financial aid, a part time job, and parents and relatives. They also know that these resources will never make up for your total ignorance about money management, which at some point will cause you to run up your bill. Credit card companies are looking for someone just like you, someone who is beginning to learn about responsibility but knows all about being a consumer.

So here is my short list of advice, not as an expert or as your parent, but as someone your age who has already seen the dark side.

Before you get a credit card:

1. Ask yourself honestly, "Am I ready for this?"
The answer 99.99% of the time should be no. For example, if you don't know what APR stands for YOU'RE NOT READY. I was so sure that I could handle myself despite numerous warnings from older adults. I had myself convinced that it was only for emergencies. But then I found out that once you get a credit card, everything becomes an emergency. The most important thing is to be honest and admit your naïveté, which brings us to our next step.

2. Ask your parents and other older adults to share their experiences.
Note that I said experiences, not advice (which they will offer but you inevitably won't heed). When you listen to their experiences you will probably be less defensive about your burgeoning adulthood and learn more about what not to do.

3. Find an unbiased expert to get the facts.
A lot of credit card companies offer little pamphlets and booklets that make use of a lot of labored "teen" slang in order to give you advice about credit, which in turn gives you the impression that they care about or understand you. Don't be fooled! Consider getting facts from someone more trustworthy like the federal government (no, really I'm serious). Try the Federal Trade Commission's online website www.ftc.gov. Read the contract terms credit cards have printed on the back of the applications and find out what all the acronyms like APR mean. Basically it's the same old cliché: do your homework.

4. Don't do it.
This is the best advice I can ever give someone considering a credit card. Just don't do it. I know a ton of people who have survived college and their early twenties without ever having a credit card. Of the several young people I know who have credit cards, only one has proven capable of handling it and doesn't have creditors calling morning, noon, and night.

Now if you insist or already have your freshly pressed card in your hands and this is just a stopover on your way to some online mega mall, remember a few things:

1. It's not really free money.
This may seem obvious, but when you are standing in Good Guys and realize that you can use the card in your wallet to buy a big screen TV, it can really feel like free money. Whatever you spend you have to be able to pay back — every single penny.

2. Chris Rock said it best: the money isn't in the cure, it's in the comeback.
Granted he was talking about doctors and medicine, but it can be applied to this situation. Credit card companies can't make money off of two types of people: those who won't pay and those who will pay their entire bill on time. The money is made off of people who will try to pay their bill, but won't be able to always pay the entire thing. Credit card companies make their profit from interest rates. If you don't pay your entire bill, your balance is forwarded to the next month with the interest tacked on. In essence, you end up paying a lot more for things than if you had just paid with cash. As long as you keep paying the interest and keep trying to pay your bill, the billion dollar credit card company rakes in your dough.

In summary, it's all a scam to get your money but if you stay smart you can scam the scammers. Having a good credit rating is important and can make it easier for you to get life's necessities like an apartment or car — even a job. Trust me, having good credit is essential for getting an apartment. And without an apartment what are you going to do? Live with your parents for the rest of your life? You can use your credit card to establish good credit by paying your bill on time and not running up your bill to unmanageable levels. The key is always paying off your entire balance each month.

If you are already dealing with creditors, know your rights. Check the FTC's website for information about your rights and their responsibilities. While it is important to establish good credit in order to get a car or apartment, it's more important for you to maintain your sanity and not be distracted from school much in the way I was.

— Brooke Wilson is a student at San Francisco State University. She is getting close to paying off her credit card. Really.