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New to College? Avoid These Common Credit Card Traps

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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.

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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 July 20, 2021

Financial Freedom is Not a Fantasy: 9 Secrets to Get You There

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Financial Freedom is Not a Fantasy: 9 Secrets to Get You There

Have you ever considered your life now, and how it would be if you had more time to spend with your family and less worries about money?

Nowadays, financial stress is one of the most troublesome weights in life. If you’ve ever encountered financial stress, you know the difficulty of not having enough income to pay your obligations or bills.

Many people say that money is not the ultimate goal of life. While that’s true, money certainly plays a very significant role. The meaning of financial freedom changes with the different phases of our life, but ultimately, it is something that many people strive for.

In this article, we’ll explain how to capture that financial freedom you’ve been looking for. Read on to learn the secrets to financial freedom.

Break Free of Your Finances

Financial freedom is about having a constant flow of cash from your assets to cover all your regular needs.

When you are not worried about your income, or living paycheck to paycheck, you gain a great sense of freedom. It’s the freedom to be obtain and do what you truly need to make your way through everyday life.

Gaining financial freedom, though, is a process of growth, making small improvements and gaining emotional strength.

Though it seems hard to believe, it is really very simple to get financial freedom.

To do so, you simply need to make sure that your assets exceed your liabilities. In other words, you’ll need to find the sweet-spot where your residuals meet or surpass your expenses. This is something that you can achieve with the proper plan.

While not every person will accomplish financial freedom, the potential for anyone to do so is certainly there. Anyone can achieve this success, regardless of their income level.

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Outlined below are 9 secrets that will help you in your goals of achieving financial freedom.

1. Stop Unnecessary Spending

We often spend money inwardly, instead of objectively.

For example, you may spend when you’re anxious, depressed, restless, exhausted, from fear of missing out, or to please others. This is a very unhealthy way to handle your finances.

To stop this habitual spending, log down all your spending over the course of a month.

Just as some people keep a food diary, keep an expense diary. Remember not to just write down how much and what you spent the money on, also include the circumstances of why you spent the money. Was it an impulse buy at the checkout line or was it something you planned to purchase?

This increased self-awareness could enable you to avoid triggering situations in the future when you are considering an impulse buy.

2. Plan a Monthly Budget

This is a great opportunity to get serious.

Take a seat with your spouse or partner and make a monthly budget based on your income, not your expenses. You are never again going to spend more cash then you have on hand.

Overspending is the thing that led you to more financial obligations. Make sure you decide every month what is coming in and what will be going out and stick to that budget… no matter what.

3. Cut-up Credit Cards

Perhaps you are the type of person who always pays your credit card balance in full before the end of your billing cycle, and enjoys the reward points you gain. If this is the case, then you’re already way ahead of the game.

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If not, you may want to consider ridding your life of the burden that credit cards bring.

Many cards have strategies set up so that if you make a certain number of late payments, they will raise your interest rate much higher. This can really add up in the long run and you won’t be doing your financial situation any favors. If you’re prone to late payments or have a large balance due on your cards, cut them up!

Without proper self control on credit card spending and payments, you are basically throwing your money away. To ensure that you have better control over your spending, use only cash or debit for all future purchases (and don’t forget to pay at least your minimum payment on your cut-up cards each month!).

4. Increase Savings

There is no doubt that for a comfortable retirement you must accumulate satisfactory savings throughout your working life.

It’s good practice to save up to 15% of your income.

Start with your workplace 401(k), if you have one. If not, a Roth IRA (if you are eligible) or a traditional IRA (if you are not eligible for the Roth) are the next logical steps.

Increase in longevity means you might be able to look forward to 25 to 30 years in retirement, or possibly even significantly more. Investing now in good retirement plans will ensure that you have a guaranteed a stable monthly income when the time comes to stop working. [1]

5. Invest Wisely

Consider investing in funds.

Specifically, you will gain higher returns if you invest in different types of mutual funds such as Debt funds, Equity funds and Hybrid funds with a proper balance, although it absolutely relies on your personal preferences and sense of risk taking.

To get the most of these benefits, make sure you are investing in a variety of assets. Another resource of investing in mutual funds is SIP (Systematic Investment Plan) where you invest some money every month in funds. SIP works by averaging the per unit price of the stock.

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Mutual fund investors are aware of the benefits of an SIP (Systematic Investment Plan). For one, it is the most secure way to invest in equity mutual plans so that wealth is created over a long period of time. This plan also helps you to gain a better sense of financial discipline, which will come in handy in all your financial endeavors.

6. Invest in Gold

There isn’t really a better way to invest in gold than to have the physical gold itself in your possession.

You can purchase gold coins and bars from mints as well as from coin dealers and other private sellers.

Another way to invest in gold is through ETFs (Exchange Traded Funds).

These are is similar to mutual funds but they are exclusively investments of gold. ETFs are great because they offer more liquidity; the ETF owns the actual physical gold, stores it, and retains the value of the shares. These shares can then be bought and sold in the stock market, and one big benefit is that the transaction costs of gold ETFs are much lower than the that of physical gold.

With its consistently-increasing demand, investment in gold can be very wise long-term investment to make.

7. Stash Emergency Funds

Whether it’s a cash gift or a work bonus, always try to save any extra money that comes your way rather than making unneeded purchases.

If you get paid every other week, you’ll get an “extra” paycheck (three rather than the usual two) twice a year. Either save those paychecks towards your emergency funds or utilize the money to pay down other obligations, such as loans, credit cards or other debts.

Make it hard to get your cash.

Put your savings in an alternate bank, maybe an online bank that forces you to delay for several business days before transferred money hits your regular bank account.

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8. Find Fabulous Mentors

Find a mentor, such as a friend or family member, who has exceptional control over their finances and pay attention to everything they do.

If you do not have any friends or family that are enjoying financial freedom, then find a mentor online! There are numerous blogs and guru websites featuring the advice of many people who have reached financial freedom, and they exist primarily to let you in on how to achieve it for yourself.

There are also plentiful forums available that share tips and tricks on how to best achieve financial freedom. Read as much as you can and start changing your habits for the better.

9. Be Extra Patient

Patience is the key of financial success.

Being patient can be quite tough, especially when you’re struggling with your finances, but having faith is worth it. You’ll continuously be on the right track if you are taking the proper steps above.

So don’t be discouraged, even if you are only saving a few dollars a month; it all adds up. Within just a few years you’ll look back proudly at your accomplishments and be glad that you had the patience to get there.

Financial Freedom for All

Anyone can achieve financial freedom, regardless of their financial circumstance.

Use the tips provided above to get yourself on the track to financial freedom and toss your monetary concerns out the window. If you wish to achieve a life with financial freedom for yourself and your family then you must adopt a disciplined approach towards your finances.

Following the simple secrets above is a great start to making your money work for you, so you can work less and live more!

Featured photo credit: rawpixel via unsplash.com

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Reference

[1] Hartford Gold Group: IRA Retirement Accounts

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