Advancement: Credit 101

LISTEN UP!!!

I know a lot of you guys out there aren't exactly concerned with credit right now; however, I would like to give you all a sneak peek of what credit really is and the risks you take obtaining it!

In simple terms, your 'credit history' is what people refer to when assessing your credit worthiness. Employers, loan agencies, car dealerships, credit card companies and many other organizations may access your credit history for offers.

Why am I telling you this now? Because once you reach the tender age of 18, sometimes months before your 18th birthday, you'll begin to receive credit card offers out of the hoo hah! You will be targeted because you are now a part of the 'real world' in so many words. You are now legal and can make your own decisions about purchases and your financial stability toward the future. You have become another entity that they can market to. Look at it this way, credit card companies are businesses too. Just like your local grocery store or nail salon. They are out to make money! So how will they make money off of you?

Yes, it is true. Having a credit card does sound like 'free money' or 'emergency cash', but once you have that power in your hands, for some it's hard to turn back. Those 'emergency' purchases turn out to be splurges at the mall, lunch for your best friend and you at your fav restaurant, or a pair of designer shoes that you probably wouldn't have bought with your 'real' money!

Let's see what a credit card really does to your pockets! Let's say that you want to purchase a new digital camera but can't exactly afford it right now and you just don't want to ask your parents to spot you the cash. So you're sitting in your room, alone and bored! You take out your credit card, go online and shop around for the latest, coolest, flashiest model you can find. Whhhhhooooooooaaaaaa! It's $299! Definitely not in your price range, but you figure if you put it on your credit card, you can pay it off a little at a time. True enough, you can! But how long is too long?

Your credit limit on your card is $350!!! And the percentage rate on your card is 12.7% a month... You buy the camera and receive your first billing statement from the card issuer. Your current balance is $299 bucks! Ok, you already knew that lol! But what's it gonna take to pay this off. Let's do the math:

$299 x 12.7%= $37.97 in interest

This means that on top of you paying $299 for the camera, you are also paying $37.97 in interest, on top of shipping costs and any hidden fees that they charge upon purchasing! This camera could actually run you $340+ dollars. Was it really worth it? Maybe, but as a college student you'll be scrapping pennies from every couch you sit on! So can you really afford it? Probably not. But there's still hope! RETURN THE CAMERA, GET YOUR 'MONEY' BACK, AND USE YOUR CARD ONLY WHEN ABSOLUTELY, POSITIVELY NEEDED!

As you pay your bill down, GUESS WHAT?!?! Creditors will begin calling you to offer you higher limits on your cards for paying on time! Sounds good, right? Yeah, I'd have to agree that it sounds good. But do you know what higher limits provoke?

They provoke IMPULSE BUYING, which I like to define as purchases that you really don't need, but you do it in the heat of the moment (kinda without thinking about the consequences). Impulse buying is OK when you are using your own hard earned cash, but not when you are utilizing the creditors for this money. My advice would be to decline the offer, and maybe even consider lowering your limit, or getting rid of the card altogether.

I hope I haven't scared you! Because, realistically, there is also good credit! Student loans are considered good credit because you are working towards something that will ultimately pay off: HIGHER EDUCATION! And your chances of being able to pay off a student loan with an education is much higher than paying one off without one!

I'm going to keep this one short today, but look forward to more lessons from Advancement: Credit 101!