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My definition of a credit card: a tool that can be used for both the construction and destruction of your personal finances.
From the moment you turned eighteen, credit cards have probably been a looming temptation for you, with offers coming from your bank in emails and even on campus. Signing up takes a matter of minutes, but the mysterious fees and high interest rates can last a lifetime.
Ideally, you’re completely aware of the fees and how a credit card works when you sign up. But so many students struggle to make the best spending choices. The long-term impact of these obstacles can eventually lead to credit card debt.
I had a very personal experience with this my freshman year. I signed up for a credit card but didn't touch it for the first six months. Once my checking account started to dry up, rather than acknowledging my unhealthy spending habits, I started racking up credit card debt. After paying for what felt like endless Ubers, snacks, books and everything else I thought I needed, I realized I had spent almost my entire available credit (not good!). This is when the panic finally set in.
Luckily, my fear led me to do some research and after a little trial and error, I created a system to pay back my debt. Once I found out how much I was spending on ride-sharing, I deleted the apps from my phone. I also noticed the difference in price between eating in and eating out, which motivated me to make better and more thoughtful choices for dinner. The last part of my self-imposed “treatment” was transferring some of my money to my savings account immediately after getting paid, rather than saving whatever was leftover later.
Here’s the full process I used to get myself out of credit card debt in six months:
Identify where the money is being spent. Is it on essentials or nonessentials (like my ride-sharing and restaurant meals)?
Acknowledge how much debt there truly is, including the ever-accumulating interest.
Put a new perspective, strategy or budget to the test (take this iGrad course to find a budget that works for you).
Have someone hold you accountable. A friend or a parent who knows your situation and can check in with you on your progress is helpful.
Find a way to measure your progress. You can’t tell if your process is working if you don’t see results.
Once you’ve seen your progress, consider adjusting your plan to get even better results.
After all of this, you probably won’t ever want to use a credit card again. But while debt is rarely thought of as a good thing, using your credit card every once in a while can go a long way to establishing good credit. I am sure you have heard of a credit score and most people know that you should aim to have a “good” one, but do you really know why or how to do that?
I recommend taking this iGrad course on understanding how to use your credit card responsibly to get a better idea of how it all works. I truly believe that you can have and use a credit card responsibly as a student, but it’s important to do your homework before you start spending.
Sun Devils turn to ASU Adulting 101 to learn (some of) the things not taught in class. Not sure about how to do something? Need to connect with an expert? We got you.