The personal credit crunch

College students on average carry nearly $3,000 in credit card debt today.

Plastic has always made our lives easier. We keep our lunches in plastic containers, drinks in plastic cups. But we donâÄôt need to use it excessively as we shop. According to Business Standard Magazine, credit card use has dropped 8 percent in January 2009 from April of last year, paralleling a decline in purchases with credit cards as people cut back on their household budgets. But users are also paying less of their outstanding credit each month according to CNN last week. âÄúCard users paid back 17.15 percent of their balance on average in February, down from 20.46 percent a year earlier, according to a Fitch Ratings index, which tracks about $285 billion of credit card loans.âÄù Card holders are struggling to catch up with their payments. The danger is that once cardholders are typically three months behind, they never catch up. Additionally Reuters reported last week that the incurred defaults by credit card companies are at a 20 year high. So where do college students fit into the mix? Perhaps better off; perhaps not. A study by Nellie Mae, a student loan company, showed that 83 percent of all the undergraduate students attending four-year institutions in the United States had at least one credit card, while the average credit card debt per student was about $2,327 in 2001. This number has since grown, resulting in an average of $2,748 of debt today. Yet according to another study by Student Monitor Financial in 2008, âÄúOf the students with cards, 65 percent do pay their bills in full every month.âÄù This number is actually higher than the adult population. However, most students owe few assets but are already finding themselves in debt outside of their student loans. Know what youâÄôre getting into when you sign on the dotted line According to the Wall Street JournalâÄôs Smart Money Magazine, âÄúUniversity students, though still financially dependent, are adults whose earning ears are just beginning, making them good risks for creditors.âÄù Additionally, the U.S. Government Accountability Office reported, on average, college students receive between 25-50 credit card solicitations per semester. We do attend college, which means we both receive these ads and passed our standardized reading tests in grade school. That said, read the fine print. Look for a card without an annual fee and one that doesnâÄôt require a monthly balance. Otherwise, you may end up paying for a card you hardly use. Have as few cards as possible, and be wary of specialty department store cards. While your coupon collection will increase astronomically, so will your annual percentage rate (APR). Using only one card and immediately paying it off each month will help you build good credit without juggling between Visa and Mastercard and the like. On the other end of the spectrum, know the penalties youâÄôll incur when you donâÄôt pay your balance. Use a calculator and project how long it will take you to pay off a purchase that is out of your budget. If you pay only the minimum monthly balance, how long will it take you to pay off $1,000, and how much more debt will the interest tack on to the original sum? DonâÄôt spend more than you can pay DonâÄôt get slap happy with your plastic and do use cash or debit whenever possible. When you begin to use a credit card for smaller purchases like lunch or coffee, expenses can easily add up without realization. If you bank online, check your accounts weekly and keep track of the purchases you make. Often, a credit card can be paid off online immediately after making a purchase, thus allowing you to stick to the rule of spending no more than what you have money for when you make a purchase. Needless to say, interest rates fly through the roof when you donâÄôt pay off your monthly balance. If you live for drama, find it on âÄúDays of Our LivesâÄù rather than ruining your own by waiting to see if that credit card bill will get in on time. But, if you do miss a payment by a small window, make an effort to call the credit card company. They will sometimes reverse the interest if you question the bill. However, donâÄôt assume this will be a given service. Even if you have a fixed interest rate and killer APR when you sign up for your credit card, it doesnâÄôt necessarily mean it stays that way. Credit card companies are only required to give you a 15-day notice before a change in interest rates. Exceeding credit limit Contrary to popular belief, a purchase that puts you over your credit limit wonâÄôt necessarily be declined. According to Smart Money, âÄúAdding insult to injury, banks often levy a so-called overlimit fee against maxed-out cardholders âÄî roughly a $30 penalty every month your balance remains above the credit limit. An ABA spokesperson says that âÄòconsumers would rather deal with the fee than the embarrassment of being declined.âÄô âÄù Hogwash. Let your declined card be your wakeup call. ItâÄôs embarrassing, sure, but far better than stacked fees each month you cannot pay off the enormous balance on your card. Kelsey Kudak welcomes comments at [email protected]