If there's one thing you'll need a lot of while you're at school, it's money. Tuition for undergraduate degrees, an occasional night out, books, school supplies - all those large and small expenses add up fast when paying for college. While students had to rely on cash or checks at one time, today's freshmen are relying more on credit and debit cards. These are extremely convenient, but can get you into trouble if you're not careful. Here's an overview on each of these common payment options.
Credit CardsHow they work: Credit cards can be used to pay for goods and services at most places of business. The card is swiped through the machine, and the amount you spent is subtracted from your account. The outstanding balance of debt must be repaid at a later date.
Why they're great: Credit cards are great to have when you are temporarily short on cash and faced with unexpected expenses. They also provide protection against fraudulent purchases, so that if somebody uses your card without your knowledge or permission, you probably won't be held financially responsible.
Concerns and considerations: If you have no credit history at all, it may be hard to get approved for some cards. Credit card companies know this, and many offer cards designed especially for college students. These cards often have low spending limits, and may also require cardholders to pay high annual fees. However, there are also many student cards that do not involve an annual fee, so choose one of these instead. Use the card responsibly and pay off the balance each month to establish a positive credit history.
Remember, anything that is charged on your credit card will have to be paid back. Try your best to avoid accumulating substantial credit card debt. The high interest rates charged by most credit card companies can make it almost impossible to pay back a large balance. In addition, a negative credit rating can impact your ability to secure a car loan, mortgage, or even a respectable job. If you know you won't be able to resist reaching the credit limits of your card, don't get one.
Debit CardsHow they work: Debit cards are used to make purchases. Many colleges and universities issue "e-cards" to expedite non-cash electronic purchases. When the transaction is approved, the amount spent is deducted from the balance currently in your account.
Why they're great: With a debit card, you never have to worry about overspending, since you can only spend the amount that is in your checking account. This reduces the possibility that you will get in over your head and accumulate a substantial amount of consumer debt.
Concerns and considerations: In general, debit cards offer less security than credit cards. If somebody gets your PIN number and empties your account, you may be held responsible. For extra protection against fraud, look for cards which embed a holograph and place a current photo on the front.
Last Updated: 04/24/2014