College and The CARD Act

There are two real changes that have taken place for college aged youth.

– You will not be sent any pre-screened offers if you are under 21.
– You will not be able to receive a credit card if you are under 21 unless you can a) prove that you have sufficient income to pay the money back or b) you have a co-signer over the age of 21.

What does that mean for college students? It means that no longer will many college students have access to easy credit. That means that students will really have to buckle down and look at the bigger picture. Before you go to your parents and beg them to co-sign on a credit card with you, think about the potential implications of you racking up bills that you might not be able to pay and your parents becoming frustrated by your inability to pay. If you have a card together and you can’t pay it falls to the co-payer to foot the bill.

Many college students don’t even need credit cards while in college. Credit cards are a tool that can be used in emergency situations, but they tend to have high interest rates. I’d think long and hard before turning to credit cards to pay for my college expenses. Think about this, before The CARD Act, the average American college student graduated with a little over $3,000 in credit card debt. The average APR was 14%**. Paying the minimum balance, let’s say $50 a month, it will take you 9 years to pay off the debt. Instead why not be proactive and figure out what you want to spend money on and then come up with a plan to bring in at least that much money. Each semester students should:

Write down all income that you anticipate.
Write down a spending plan for all expenses.
Keep an eye on your credit score so you’ll be able to get a good job after you graduate.
Monitor your checking accounts closely to make sure you’re not needlessly overspending.

Get out of college, not into debt.

PEACE

* Undergraduates are carrying record-high credit card balances. The average (mean) balance grew to $3,173, the highest in the years the study has been conducted. Median debt grew from 2004’s $946 to $1,645. Twenty-one percent of undergraduates had balances of between $3,000 and $7,000, also up from the last study. (Source: Sallie Mae, “How Undergraduate Students Use Credit Cards,” April 2009)

** Average APR on credit card with a balance on it: 14.31 percent, as of December 31, 2009 (Source: Federal Reserve’s G.19 report on consumer credit, March 2010)

B.E. 10 Wealth for Life Principles

Thought this might be helpful. From Black Enterprise Magazine:

1) I will live within my means.

2) I will maximize my income potential through education and training.

3) I will effectively manage my budget, credit card, debt, and other tax obligations.

4) I will save at least 10% of my income.

5) I will use homeownership as a foundation for building wealth.

6) I will devise an investment plan for my retirement needs and children’s education.

7) I will ensure that my entire family adheres to sensible money management principles.

8) I will support the creation and growth of businesses owned by people of color.

9) I will guarantee my wealth is passed on to future generations through proper insurance and estate planning.

10) I will strengthen my community through philanthropy.

These are great guiding principles to use in your financial life. Please read each one carefully and consider how it might be applied in your life. I keep a copy of them taped the refrigerator in our office to remind everyone of what we’re here to do.