Interest rates, credit scores and debt, oh my! College students are in more debt that ever before. They accumulate not only student debt, but also credit card debt. Although college is a good time to build credit, it can be a time of dangerous spending, too. Maybe your checking account regularly gets dangerously low, and your savings account is just sad. Whatever your financial habits, Her Campus Mizzou has a few tips for managing your money.
The most important thing you can do is be informed. Read the information on your accounts. You could be getting charged hidden fees you don’t even know about. You also need to understand the different ways to store your money.
Credit Cards
Credit cards can be great for big purchases that you can’t necessarily afford right now but plan to pay off later. However credit cards can lead to trouble for that very reason. Many consumers use a credit card for everything. Some people pay off balances right away, but some can rack up large amounts of debt. It’s important to learn about credit cards and how they work before swiping left and right. Policies vary from bank to bank, so here are key questions to ask your banker:
- Will I be charged for carrying a balance?
- What is my interest rate?
- Will I be penalized for a late payment?
- What is my spending limit?
- What can help and hurt my credit score?
These pieces of information are extremely important to know. Some banks offer introductory low interest rates, which is why you should be aware of exactly what you’re getting into. Identify your spending habits. Will you have enough money to pay off your balance? Or are you spending money you really don’t have? Think before you purchase. Credit card transactions are generally more secure, especially with online purchases, because some banks won’t cover stolen debit card information. Make sure you f
ind out your bank’s policy on that.
You are eligible for a credit card at 18, but until you are 21, you must have someone co-sign your credit card. This just means you have a financially responsible person on your account who promises to pay your balance if you are unable. Your credit score will be very valuable when you chose to buy a home, take out a loan or make other major purchases, so starting good habits now will pay off in the future.
Debit Cards
Debit cards are ultra-convenient. They allow for quick purchases without worrying about exact change, and they are interest free. Some banks, such as Bank of America, are going to start charging for debit transactions, though. Sophomore Megan Guinn is a finance major and uses her debit card more than her credit card. Because her bank is going to start charging for debit transactions, she’s considering switching banks or using her credit card more.
It is important to check your balance regularly and not overdraw your account. Look into getting overdraft protection on your account. Then if you don’t have enough money in your account, your transaction will not go through, and your card will be declined. If you don’t, you could end up spending more money than you actually have in your account plus paying overdraw fees that can really add up. It’s a good idea to have a set balance you don’t let your account dip below. Sophomore Jess Vogel opts for cash over a debit card. “I like to have as much money in my bank account as possible in case of an emergency,” she says. “I’m paranoid.”
Savings
Money in a savings account earns a little bit of interest each month. Savings accounts are also insured, making them great for storing money that you do not plan on touching for a long time. A lot of banks offer student savings accounts. Find out the options from your bank. Some banks require a minimum balance and might charge you if you don’t maintain that balance. You can transfer funds from your checking into your savings account and vice versa. Some accounts allow you to have a set amount transferred from your checking to your savings each month.
Spend wisely, collegiettes™!