This fall, Canadian
back-to-school spending is tagged to be a staggering $1.83 billion, and
young adults are some of the season’s biggest shoppers. It’s a time
when students think about getting a credit card to help them finance
their large purchases. Your Better Business Bureau (BBB) and the Credit
Counselling Society reminds students to do their homework before
shopping for a credit card.
Credit cards can help you establish and build a good
credit rating, offer safety and convenience or be there in case of an
emergency. However, when used irresponsibly, a credit card can trap
people in a cycle of debt that can take years to pay back.
“Remember, a credit card does not give you more money
to spend, just the ability to delay paying back the borrowed money,”
says Lynda Pasacreta, President and CEO of the Better Business Bureau
of Mainland BC. “The credit card company will continue to charge you
interest each month until the balance is paid in full.”
This fall credit card representatives will be on campus
offering students an opportunity to obtain a credit card. Students may
also receive solicitations in the mail stating that they have been
pre-selected to have a credit card.
“Before opening a credit card account, make sure you
understand all of the terms and your responsibilities as well as other
options like a secured card that sets the credit limit based on the
amount of money set aside in a term savings account,” states Scott
Hannah, President of the Credit Counselling Society.
Or, if you are simply needing a card to shop online you
can purchase a prepaid card, which operates much like a store gift card
but can be used anywhere credit cards are taken. You buy the card and
spend only the money you deposited into the card’s account. This is
great way to avoid identity theft, since the only money that could be
lost is strictly what is placed on the card. Using this type of card
will limit the damage down to your pocket, and leave no affect your
credit history.
Do's and Don'ts for Post-Secondary Students Using Credit Cards:
- Shop around: ask companies about their annual fees, and what the interest rate for the card will be.
- Avoid late payments: Late payment charges will be added to your
account balance if you are late or miss payments. This may also
negatively impact your credit history and can lead to higher borrowing
costs in the future.
- Pay in full each month: If you pay your credit card balance in full
before the payment due date you will avoid having to pay any interest
charges. If you make the minimum payment on time you will be required
to pay all of the interest that has accrued on the previous month’s
outstanding balance. If you can’t pay the balance in full stop using
your credit card and pay a minimum of two or three times more than the
minimum payment until your account is paid.
- No fast cash, ever: Credit cards should never be used like a bank
machine. Getting a cash advance leads to additional fees both for the
advance and higher interest charges.
- Don't use it for tuition: using credit cards to finance your
education is not your best option. Credit cards tend to have higher
interest rates and repayment terms than other education loan options,
which typically offer payment deferrals, and debt consolidation of your
loans after graduation.
If you are having debt problems you can get help by
contacting the Credit Counselling Society; call toll free at
1.888.527.8999 or visit Nomoredebts.org.
For more information about credit cards, visit our Buyer’s Tips section: go to www.bbb.org.