Credit Cards – Friend, Enemy, or Frenemy?
Do me a favor – take a minute and open up your wallet. If it’s anything like mine, it’ll have various IDs (OneCard, license, etc.), debit card, business cards, maybe some type of rewards card. In any case, your wallet is probably filled with all types of plastic cards. One of the most prominent pieces of plastic in my wallet, though, is that sleek, transparent credit card. It beckons to me. It yells out “SWIPE ME! GO ONLINE AND BUY STUFF WITH ME!” Occasionally the card wins, but for the majority of the time, I’m able to turn down the volume to a whisper.
The ability, nowadays, to spend on a credit card is easier than it has ever been. Credit is widely available (although, admittedly, not as widely available since the Great Recession) there is no shortage of methods to spend it: swiping a physical card, making online purchases, or using smartphone apps. It’s no surprise that college graduates, on average, have up to $3,000 in credit card debt. Though that may pale in comparison to the tens of thousands of dollars in student loan debt that many students carry, when you consider that most credit cards have an interest rate that hovers around 14% things can get ugly fast! That’s right, every time the monthly balance is not paid down in full, another 14% is tacked on, exponentially increasing your debt to the credit card company. If numbers are your thing, or you’re just interested in the way that interest rates work, check out this more in-depth, but easy to read article about credit card interest rates.
Why am I sweating this credit card stuff? The reason is simple: having a stellar credit history and score will be a vital tool once you’re out there in the “real world.” Virtually every large purchase you make—a car, home, or even if you’re renting a place—will require that you have strong credit. Having a squeaky-clean credit history can actually save you money, because you’ll be in a great position to get the best rate on your loan as possible.
Credit history can also be important when you are job searching. Although there is almost no evidence linking credit history with job performance, in a study released just last year, nearly half of all employers check a potential job candidate’s credit history as part of a background check, and many have been denied employment based on a poor credit history alone! So not only does your money depend on good credit, your job might too!
You might be saying to yourself, “OK. I get it. Credit is really important and I should have a good credit history, but where do I begin?” Great question! Here are a few simple things you can do right now:
- Here’s an obvious, but important step. The best way to ensure a rock star credit history is to pay any and all bills on time – all the time! Life happens and there may come a time when you’re not able to pay a bill on time. If this happens, be sure to call your credit card company and notify them.
- Check out UNC’s online financial literacy program, CashCourse. It’s free to register and has plenty of useful information about credit cards and other financial topics.
- Monitor your credit report! By federal law, you are entitled to a credit report free of charge every year. Check the report for an inaccuracies or errors.
If you’re interested in other ways that you can improve your credit history and score, check out this great resource.
While a strong credit history is just one piece of the puzzle for optimal financial wellness, getting a head start now is a huge step in the right direction. One that will literally pay off for the rest of your life!
This blog was written by Dennis Carmody. Dennis is an MPH candidate in the Health Behavior department at the UNC Gillings School of Global Public Health. He is currently enjoying his summer practicum with the great folks at UNC Student Wellness.