The 4 Cs: College, Cash, Credit and Confidentiality
College students’ workload is only one aspect of higher learning. Many freshmen will soon discover a world of opportunities for easy credit, and an online marketplace begging them to spend it. While parents understand the potential pitfalls of money management, not all college-aged students do, and without careful planning and budgeting, they can run into debt problems that can weigh on them for years to come. A student’s first experience handling credit can be a make or break situation.
The primary issue to consider is what kind of budget is required. Students should understand how a budget works – and the consequences of not having one. A budget will help establish how much money may be needed on a month-to-month basis and the best way to pay for expenses. Connecticut BBB offers free budget management tools at http://www.bbb.org/us/consumer-tips-finance/.
Will that be cash? – Many debit and credit cards have either withdrawal or annual fees. Several trips to an ATM can ring up significant monthly fees, often a $2.00 withdrawal fee per visit if the money is withdrawn from stand-alone ATMs that are fixtures around colleges and nearby businesses.
Debit or Credit – While it is important for young adults to establish credit, once a budget is established, consider whether paying by debit card may be preferable to loading up a credit card. Many people use debit cards for all but groceries, gasoline and cash-and-carry purchases, and credit for online shopping.
Shop around – Some credit card issuers have special offers for students’ first credit cards. Start with your own bank, but look at other options online. There is a wide range of rewards options such as a percentage of cash back on purchases to points that can be redeemed for a variety of supplies and gadgets or money back on gasoline purchases.
Compare - Be sure to check terms and fees before you agree to open a credit card for your student. Are there annual fees? Find out the interest rate on the card. Is it an introductory rate? If so, how long does it apply? If a credit card is to be used for overdraft protection, interest rates typically exceed 20 percent. Find out whether there are other fees that may apply in the event of an overdraft.
Keep it confidential – Financial institutions and credit card issuers are required to send clients details on how private information is shared, and offer a mechanism to opt-out of most sharing with third parties. Students also should be on the alert for online scams that attempt to collect their birthdates and Social Security numbers, with the ultimate goal of perpetrating identity theft.
-Submitted by Howard Schwartz, Executive Communications Director, Connecticut Better Business BureauDo you like Connecticut Better Business Bureau posts? If you don't want to miss any of our helpful posts, you can subscribe to our blog by clicking this link and then click "Get email updates," and our posts will arrive in your email.