There are few things more important in America today than your credit score, yet so few college students have any idea about credit. And to help us sink our credit score before we even know it, every year our campus welcomes an army of creditors ready to trade your soul for a really cute credit card with a dolphin or a Colts logo, never mind the 22.5 percent annual percentage rate that comes along with it.
Drinks on me for everyone at Dill Street!
Now: reality. The average credit card given to a college student carries a 19.95 percent APR and a $500 limit. If you spend this card to it's limit, you're paying about $9 a month in interest, plus any fees, penalties and minimum payments against the principal. If you make these payments, most cards will lower your interest rate and you can build your credit, which will one day help you to buy a car or home at a reasonable rate. Owning a home is one of the best ways to secure your financial future, so long as it is properly maintained as it can be used as an asset to borrow against to secure future loans with reasonable interest rates and maintain a high quality of life. This is living in the black, good credit, low interest rates and opportunities to borrow when necessary.
Then there comes the tale of Americans living in the red, those who have taken the wrong turn on credit lane and for whatever reason, did not make their payments as they were required. Of course there are good reasons people don't pay bills, and there are bad ones that are too numerous to consider, but either way, the creditors want their money and they'll ruin you if they don't get it. Living the "red" American life can be a nightmare.
Imagine, for whatever reason, you have put your credit score in the commode and now are considered "high risk." Your options for buying a car are now limited to "buy here, pay here" dealerships who have no problem coming to your residence and taking back your vehicle, most likely an old-model jalopy, if you are late on just one payment. Buying a home is almost off the table, unless you are willing to pay up to 22 percent interest on a mortgage, which in comparison to prime rates in the 5.5 percent neighborhood, is off the charts. Perhaps you'll run a little short on cash some weeks paying such high interest rates on your car and home, but fear not! There is the friendly local "cash advance" store willing to loan you up to $500 until your next paycheck, for just a small fee of $15 on each $100 borrowed, which would be the equivalent of a credit card with a 180 percent APR. But you can pay that back if you get an "instant refund" check for your income taxes! All you have to do is let a major company file your taxes and then give you a loan, which is paid back to them with your actual refund check. This only costs you 10-12 percent of your refund.
These establishments exist, and thrive, because there is a need for them from the "red" class of Americans, and until legislators step up and realize what predators they are and treat them as such, they will continue to devour the lower class and their income. Thus, rather than waiting for lawmakers to hold these professional loan sharks accountable, pay your bills on time and stay away from the "red" lifestyle.
Write to Robb at robb614@aol.com
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