Good Morning and Happy Monday! With every week that passes the “Back to School” season is coming closer and closer into view. Parents are seeing the light at the end of the tunnel while students and even some teachers are dreading going back to the classroom. I have been thinking about writing a post like this for a while because I remember all too well the abundance of “FREE” t-shirts, water bottles, and even iPod nanos given to us students at Spelman College to urge us to sign up for credit card offers and bank accounts. Simply put, banks and credit card companies target students and what separates the students who kill their credit earlier on and those who become financially savvy adults is knowledge. What makes it ironic, though, is the idea for this post came from my own memories and experiences as a college student, only to have suspensions of credit card companies and banks confirmed Friday on a visit to Clark Atlanta University for freshman orientation.
Do Not Open an Account without Researching the Bank
I guess in this economy, banks have scaled back on their swag. I saw a few t-shirt being given out, some water bottles, a nice highlighter set, but no iPods (sorry students). Now I’m not saying credit card companies and banks are evil, you just have to know how to play the game. Banks are becoming increasingly aggressive when it comes to recruiting the business of college students. This can be used to your benefit with a little bit of research
and patience because the banks are presenting more competitive offering to beat out the other banks. College students and parents, if the bank cannot offer you FREE checking, FREE online banking, and most importantly for the student, no minimum balance, then walk away because another bank will.
Location, Location, Location
I remember taking a weekend with my parents to drive around the campus and surrounding areas of Hampton University in Hampton, VA. I figured I needed to know how to get to all of my favorite places like Target, restaurants, and the mall. My parents, however, thought it was important that I knew where the closest bank, grocery store, and hair salon (shout out to my mom for trying to maintain my whip appeal) were located. My advice for you is to get acquainted with the area. The bank from your hometown might not be available in the city where you or your student will be attending school, therefore learning the area is important in trying to find the best bank. Now let’s take a moment for the other factors that could influence your decision to pick a bank. Will you be a commuter or resident? Is there a bank already on your campus? Are there shuttle services offered to get you back and forth? Are there any banks located within walking distance? If you cannot physically get to a bank it doesn’t matter whether it is a great one or not.
Credit Cards and the Credit Card Act of 2009
Pay off your credit card balance in FULL each month. By doing this, it forces you to really stop and think about your purchases because resetting your balance each month causes you to buy only what you can afford. American Express, for example, makes cardholders pay in full. Think about it, it is a win- win situation because you don’t fall into the increasing numbers of consumers who are in serious debt due to credit card spending and they get their money on time. The College Board adds, “Credit cards are actually high-interest loans in disguise. Companies may lend you money, but they get it all back and a lot more by charging you fees. Finance charges on the unpaid portion of your bill can be as much as 25 percent each month, and cash-advance fees have even higher interest rates. Annual fees just to carry the card in your wallet range from $20 to $100; there are also late-payment fees, typically $25-$50. Not paying off the entire amount in your account each month can lead to big finance charges.”
It is important to know that a lot of the information written for students and parents about student banking and credit cards was written before President Obama signed the Credit Card Act into law. Now, credit card issuers are banned from issuing credit cards to anyone under 21, unless they have adult co-signers on the accounts or can show proof they have enough income to repay the card debt. That’s right; it’s not just the students’ credit score that is at risk. Bad financial decisions of students will directly affect the credit of their adult co-signer. The Credit Card Act of 2009 also stated that credit card companies must stay at least 1,000 feet from college campuses if they are offering freebies to entice student to apply for credit cards.
To be honest, I didn’t get a credit card until I was weeks before graduating from Spelman College. I waited because I was not sure if I could handle the financial responsibility that I had witnessed other fail. I knew I would already have to worry about my girl Sallie Mae and the student loans I was owe her, so I didn’t want to add the extra stress of credit card debt as well. It worked for me and yes, I recognize that every situation is different. Before applying for a credit card and/or opening a student banking account, do your research. A good starting place would be my 5 Non-Negotiable for Students and Banks. College should be one of the best times of your life so don’t taint it with worries over bad finances. Start smart, create great habits, and end on top.
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