Monday, November 5, 2012

Credit Cards, Payday Loans and Other Stuff

College is an exciting time. For many, it is the first time we are away from home for longer than a short time. Parents aren't there to tell us what to do. This is the first time that we get to actually make our own decisions.

Most of us have also just turned 18. This means that you are now a legal adult. You can vote, join the army and even buy cigarettes and porn. But this also means that we can legally sign a contract to just about anything we could want. This is a big time to make some very bad decisions that you may regret later down the road.

Credit card companies are not stupid. They know that all these 18 year olds are newly on the market and they can now sign for their cards. Most students don't know about interest rates and other parts that come into a credit card.

At 18, I thought credit card was money that I didn't have. Many students are like me and they will sign for a credit card because they will get a $500 or a $1000 credit line. Once that plastic is in their hands, they will spend it on everything they want. They won't think that they will have to pay that back, with interest (which means you'll end up paying more than it would have been if you saved up for it), in a certain time. Many of these students are freaked out when they get that first bill in the mail and they don't realize that they can't even pay the minimum.

So they won't. I did it, trust me.

They will ignore the bill, and the next one. Soon, they receive notices of being very late, of the company trying to settle their debt, and later that the bill has been sent to a debt collection company.

Then the calls begin. Debt collection companies buy the debt that a credit card company for a smaller price than what the debt is. These companies will bug you via the phone and the mail over and over and over again. They just want your money and they want it now.

I ran into this problem. When I was 18, I got a Discover credit card with a $500 credit line. Instead of keeping it in my back pocket for "emergencies," I spent the money stupidly. I do admit this. Then I couldn't pay the bill, so I ignored it. For over 2 1/2 years, I ignored calls and letters from debt collection companies. This past December, I finally settled the account with the debt collection company.

And my credit score suffered. One thing that young adults ALSO don't understand is that you have a credit score. This score is what companies look at to give you a loan for a house, or a car, or even school. At this time, because of my 18 year old stupidity, I have harmed my credit score for at least the next 7 years.

Credits cards can be helpful. As an 18 year old, you don't have any credit. Credit cards, if they are used wisely and payed off on time, can help give you a credit score which will help you in the future. Sometimes it's okay to charge something, as long as you can pay the minimum balance on your credit card on time. Once you begin to default, you are on a downward spiral.

Another huge no-no that many college kids fall into are payday loans. These companies, like  Check N Go, give you cash money on the spot. These loans are even worse than credit cards. For one, the interest rates are high. I remember reading one where I would receive $500 and in 30 days I would have to pay $800 back.

And the 30 days is an issue. Most students don't make $500 in 30 days, so they totally don't make $800! These companies are ruthless. I know I haven't actually gotten a loan, but you give them your information. I know I had some issues with someone trying to scam me because they got my information from a company I tried to get a loan from. It was a nightmarish day where I ended up making a police report with the Michigan State police, the FTC and the FBI.

Basically, if you want something that you don't have (and it isn't necessary for life), save for it. Get a job! Wait, it may get cheaper. One thing to remember is you don't have to have the newest things. These past few times, my new stuff have been because I have saved the money for it. I didn't get my new phone until September because I couldn't afford it when the new upgrade became available in July. It was something I wanted and I saved up for it.

Here's some tips from my experience:

1. Use cash. I find that if I keep cash to buy food/stuff on campus with me, I'll not overspend. This is because I only have a certain amount, and if I want to make that last for a few days, I can figure out how much to spend at a time. If you use your debit card, you may not remember how much is on the card at that time, and you may actually overdraft your bank account (giving you fees that you will lose).

2. Read the contract. Don't sign something blindly. Take the time to read the whole contract. I remember my car insurance lady telling me that it was smart that I took the time to read the whole thing. Sometimes companies will try to hurry you into making a decision and signing the contract. Stick to your guns. If they don't have the time to sit there with you, ask to take the contract home and return it when you have the time to go over it. There is also no harm in asking questions and even having a lawyer look at the contract.

3. Don't buy everything because it's the newest, greatest thing. I know, we all want the brand new thing so that we can tell all our friends. If you don't have the money to have it (and cover your living expenses), don't buy it. Many times, the newest electronic is also very glitchy. It's worth waiting for the company to get all the kinks out AND saving the money for it.

4. Remember the important things. You need food to live, so make sure you have money for that. You need to live somewhere, so if you don't want to be on the streets with your TV in hand, make sure you live somewhere that you can afford the rent AND pay that rent (and other living expenses like heat and electricity). You do need clothes, but you don't need the most expensive clothes. There ARE nice things at Good Will and Salvation Army! You don't need a car usually, as there is public transportation in many cities. You don't need the internet or a phone (though one is nice to let your family know you are alive...but you can get internet ON a phone for rather cheap now!)

5. Find cheap activities to do. There are plenty of activities around campuses and in close cities that are rather cheap (if not free!) Don't pay an arm and a leg to participate in things. Getting together with friends can be more fun than other things AND cheap!

6. Coupons! I know, I know. It seems like something that is for moms, but it isn't! For Christmas, my Aunt Linney gave me a book called the "Entertainment Book." This book was a huge book of coupons that had anything from free meals, to free movie tickets, to free carwashes. It was pretty awesome and saved me a lot of money this past year! Find one in a nearby city near you. It is $30 and has saved me more than that in just movie tickets! It is also worth clipping coupons for food you eat, toiletries that you use and places you like to go. Anywhere you can save a couple bucks is worth it. Also become a member of store savings clubs. Kroger has the Kroger plus, VG's has a card and Meijer has mbucks where you can clip coupons online and enter your phone number at the register and it will apply any that count. Totally worth it.

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