During my college years our mailbox was filled with Student Loan companies making sure that she knew that they had for her for a while she had to complete her degree. Our company is offering her the credit card in full gear.
I have been shredding the offers. I have shared with her the trap that these companies are setting for her and her contemporaries. Last week instead of shredding the offers - I let them accumulate in a pile on my desk. We opened them and the first few sentences of each letter was quite eye-opening.
"You worked hard to achieve your degree and that hard work earned you our respect ..."
"Congratulations on achieving your college degree." As you begin your professional life you may need to rely on credit to get you started ... "
"Great job. Let us reward you with a great opportunity to assist you to build your credit rating ..."
As the offers come in the recent graduate admits a few of them - feeling great that their hard work has been recognized and with the noble objective to have the cards in case of an The card companies may tout credit limits in the $ 1500 to $ 2000 range - but the reality is that once the applications are submitted - unless the graduate has already achieved excellent earnings - most times they will be given a smaller limit - in the $ 500 range.
Sometimes it & # 39; sa piece of clothing, or a night out with friends, or even the the purchase of a gift for a loved one. The intent - as we "I will pay the balance out when the balance comes in." Then then the bill comes in and the minimum payment is only $ 25 - most will pay the most to have they have other cash flow need that seem more important at that time. And this cycle repeats itself month after month.
The credit companies will start paying on time moves. That time of the time - that little limit of $ 500 - moves to $ 750 - then to $ 1000 - then to $ 1500. Move the clock ahead 5 years and these young adults can find themselves in $ 20,000 plus of credit card debt - paying minimum payment of $ 500 per month - and in reality making no dent in the principal balances. It is a cycle of financial paralysis.
Explain to these young adults the your of the circles. Make sure they know what are these companies are trying to have their best to get them into a revolving credit nightmare. "delayed gratification" - instead of what the credit companies are offering - "instant gratification".
Credit is important - no argument there. But the proper utilization of credit and understanding the pitfalls is equally (if not more) important. Spread the word.
