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New to College? Avoid These Common Credit Card Traps

New to College? Avoid These Common Credit Card Traps

Every year, millions around the world head to college, eager to continue their studies at the next level. Unfortunately, aggressive creditors often await them on the other side, and those who are not money savvy or financially literate may eventually succumb to the magic plastic because of their poor spending habits.  If you are new to college, be sure to avoid the following common credit card traps.

1) Freebies

Credit card companies are experts at preying on vulnerable college students who may be strapped for cash and looking to acquire any free item that they can get their hands on.  As the famous quote states, “There ain’t no such thing as a free lunch.”  This is definitely true in the credit world, since the promotional offers, which typically include t-shirts, water bottles, or food coupons, are usually distributed in exchange for a completed credit card application. It’s never a good idea to apply for a credit card solely for the purpose of receiving a free trinket in return because the card can end up costing you way more than you bargained for through interest, fees, and negative marks to your credit file if used irresponsibly.

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2) Minimum Payment

Once you have an outstanding balance, it may seem tempting to only remit the minimum payment due each month.  However, doing so will only dig you into a deeper hole because this amount typically only covers the interest, while the principal remains untouched, and the outstanding balance will continue to rise as interest accrues each month.  Instead, you should carry little to no balance at all times to avoid getting caught up in the minimum payment trap and spending an excessive number of years paying off a balance that greatly exceeds the amount of the initial purchases.

3) Cash Advances

Instant access to a substantial amount of cash seems fantastic (especially if you don’t have to pay it right back), doesn’t it?  Think again.  Cash advances are typically accompanied by a higher APR and transaction fee that may not apparent to you without carefully reviewing the terms and conditions. Using your credit card like an ATM card to make withdrawals not only fosters irresponsible spending habits, but could possibly dig you into a deeper hole than you bargained for.

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This is especially true if your available balance is low and you exercise this option to make a small purchase without considering the other fees that may follow.  Suddenly, that item from the grocery store ends up costing you three times the amount of what you actually paid for it as a result of a penalty APR and fee applied by the creditor when you exceeded the available credit balance.

4) Hidden Fees

If you fail to read the fine print, a “gotcha” is bound to appear sooner or later.  Important items to understand include:

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  • Rewards (and restrictions)
  • Introductory Offers
  • Late Payment Fees
  • Dormancy Fees
  • Annual Fees
  • Grace Periods
  • Minimum Interest Assessed
  • Customer Service Fees

The introductory offer of 0% interest for the first year may be worth it only if you plan on paying the balance in full before the promotional period expires.  If you fail to do so, you may receive a statement after the thirteenth month that includes retroactive interest on purchases from the prior year.

5) Statement Review

Since credit card companies are managed by individuals and not systems, they are subject to human error.  Small mistakes can roll over into your credit card statements, and may go unnoticed if you fail to conduct a thorough review of your activity each month.

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If you discover an issue with your monthly statement, contact the creditor immediately and provide any supporting documentation needed to remove the inaccurate information.

6) Credit Limit Increases

Creditors sometimes grant credit limit increases to those who exhibit responsible use over an extended period of time.  Unless it is absolutely necessary to do so, refrain from accepting additional credit.

The offer may boost our credit utilization initially, but could also open the door to unnecessary expenditures.

Obtaining a credit card isn’t necessarily a bad thing when you enter college, but it is important to use it responsibly as a credit building tool and remit timely payments to avoid debt-management issues in the future.

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Last Updated on March 29, 2021

Life Insurance: A Secure Way To Protect Your Future.

Life Insurance: A Secure Way To Protect Your Future.

Life is a journey full of ups and downs. No one can actually predict what might happen the next moment; there are times where the happiest moments do not even take a second to turn into the gravest. Planning for your future can help you face such unwelcomed but irrepressible situations with much ease. We all want to make every memorable event of our life more special and to cherish all those moments happily and worry less, you must financially plan your future. But no one has control over life and death. Who would wish to see his family suffer in his absence? Insurance hands over the financial jeopardy of life’s happenings to an insurance company.

Importance of getting a life insurance

No one has control over life and death. Nobody would like to see their family suffering in an absence, and that’s why many people recommend life insurance. A life insurance plan is one of the best ways to secure the future of your family, even against those financial troubles after an untimely demise. These plans are safe and credible, and you could trust them for your family’s better future.

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On the other hand, a life insurance policy is a contract between a company (insurance provider) and policyholder in which the insurance provider ensures to pay a certain amount of money to the nominated beneficiary in case of the policyholder’s death during the term of the agreement. There are different types of insurance plans, and it is important for you to know the benefits of those plans such as a funeral, medical or some life expenses provided they are mentioned in the agreement.

Choosing the right insurance plan

If you’re about to select an insurance plan, you should consider some important factors:

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  • The time at which you start investing in a program and the number of family members you want to get insured. Obviously, a married man with two children has different needs compared to a single one. The number of persons who are dependent on an individual also varies from person to person.
  • The next thing you need to consider is you and your family needs. What are your child’s dream, your retirement plans, for how long would your dependents need financial support, any personal injury, etc. And do not forget those events or situations that will surely demand a huge sum of money.
  • The next thing one must consider is your current income. You should preferably choose a plan which you can afford.

Now you must be having a pretty clear idea of how to choose the best plan for you. Further, you should also compare various plans offered by different companies and numerous sites available online that help will you to compare them.

Differences between life insurance plans

Here’s a short brief of some plan categories you can choose according to your needs:

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  • Term Insurance Plan – You have to pay once, and your nominee gets the paid money under your misfortune demise. It ensures a person for a fixed time. If you survive the policy period, you do not get your premiums back.
  • Whole Life Policy – This plan continues for your lifetime. Under this, the policyholder has to pay regular premiums, until their death.
  • Endowment Policy –  In case the individual dies during the tenure, the beneficiary gets the amount assured. If the person survives the policy tenure, they gets back the premiums paid with other investment returns along with several other benefits.
  • Money Back Policy – In this a portion of the money invested is returned to the investor at regular intervals. If you survive the insurance term you get the entire amount back; else the beneficiary receives the entire sum assured.
  • ULIPs – These are the life insurance plans that offer you future security plus wealth creation options.

Many people do not opt for whole life policy and endowment policy because of the high amount of money you need to pay, while others may prefer to opt for these if they have a high life expectancy. Surely you will find the best one for you.

So what are you waiting for? Plan for your future and live a happier and carefree life today.

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Featured photo credit: aryehsampson.com via aryehsampson.com

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