"As a child, a library card takes you to exotic, faraway places. When you're grown up, a credit card does it." -- Sam Ewing (Readers Digest, Dec. 1997)
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Credit Cards: What you should know

  • What is Credit?
  • Credit Course: Unwary Students Beware
  • How Much Does It Really Cost?
  • Debt Management Strategy
  • Credit Card Interest Rates

  • What is credit?
    Companies give you access to money based on factors such as how much money you earn, how much you have (savings or personal properties like cars) and your credit rating (how well you have handled your past or current credit).

    Credit lets you buy today but pay tomorrow. Companies charge for this service in the form of interest since there's no guarantee you'll pay them back. For example, if you lose your job, you may not be able to pay even though you want to meet your obligations. The money they get from interest helps to recover some of the losses they take when people can't pay them back. The key to credit is knowing the cost of using it and learning to manage it!

  • Credit course: plastic seems like easy money but can soon snare unwary students
    (Borrowed from the CANOE web site)

    Lifesaver? Or bane of a student's financial existence?

    Credit cards may be as easy to get as beer at a campus pub, but analysts say young people should closely watch their plastic spending or risk a bad debt hangover.

    "The difficulty with credit cards is (spending) never seems real," said Joyce Brown, co-ordinator of counselling services at BDO Dunwoody in Hamilton.

    "When you're using a credit card, you're banking on a rosy future, and these kids are just starting out."

    Credit issuers are aggressively targeting university and college campuses across North America, flooding students with credit-card applications.

    "Obviously, the credit card companies are looking for a new market, and what a great market there is," Brown said.

    "They're going to a population that's going to be highly educated ... and hopefully have the best opportunities for a better job," Brown said, adding that issuers are banking on students' staying loyal to their first credit provider.

    But while a card is great for emergencies and making purchases over the telephone or the Internet, she said it can lead to financial disaster -- especially when coupled with student-loan debt.

    Students are especially susceptible to credit mismanagement because they're new to dealing with their finances, said Carl Ritchie, senior vice-president at Mandelbaum Spergel Inc., a bankruptcy trustee firm.

    "In many ways ... they don't know right from wrong," Ritchie said.

    If young people haven't learned budgeting skills at school or at home, "they're a fish out of water, so to speak."

    It starts quite innocently, Brown said, with students using credit cards to pay for drinks and dinner, perhaps a movie or concert ticket.

    But when the bill comes, young people often choose to pay only the minimum, carrying the balance over to the next month. That's where the trouble begins, as credit cards usually come with a hefty interest charge for the full monthly balance.

    (Continued on Page 2)

    Royal Bank Presidents Choice Financial Bank of Montreal
    CIBC TD Bank Financial Group Scotia Bank