1. Understand how your money works. Despite living in a society driven by money, students are taught very little about how money works. According to United College Marketing Service, 8.5% of students drop out of college due to money-related issues. That makes money the number reason students drop out—ahead of academic failure. You can’t win at sports without understanding the rules and learning how to play. The same principles apply to money.
2. Don’t sign up for a credit card without knowing how they work. Credit cards are like power tools. If you use it without knowing how, you’re more likely to get hurt. Millions of dollars are spent on marketing credit cards to college students. On average, they will receive about 50 solicitations per semester. There is a lot to read in the fine print, such as adjustable interest rates, transfer fees, late fees, etc. Take your time, and choose the right card for you. In addition, if you use a credit card to supplement your income, you may create a life-long habit of overspending. You don’t want to get stuck in the vicious cycle of debt before you even get your life started.
3. Learn how your debit card works. Debit cards are a much better alternative to credit cards since you can only spend money that you actually have in your account. But don’t let your guard down—you still have to be careful with debit cards. If you are using an ATM that is not owned by your bank, you could end up paying as much as $6 per transaction, just to get cash. In addition, you may be charged each time you use your debit card at the store, if you don’t select the “debit” button. Debit cards can be a great money management tool in our automated world, but there are still rules to follow to avoid getting ripped off.
4. Keep your accounts balanced. Too many of us take our debit card receipts and shove them in our wallet until we can deal with them later. But you can’t always rely on your debit card receipts as a means of tracking your account balances. If you have to write a check, or you have scheduled an automated payment, that withdrawal amount won’t show up until after the money has come out. For instance, if you schedule a $100 payment to come out on the 15th, and you check your account on the 12th, it still shows that extra $100 in your account. If you forget about that scheduled payment, then you may spend that $100 and get hit with overdraft fees. In addition, some ATM receipts lag behind by a day or two worth of transactions. It is important that you keep track of how much money you actually spend from your account, and how much is going in each month.
5. Protect your identity. Crimes such as identity theft and stolen credit card numbers have been increasing over the past several years. Never give out your personal identification number (PIN) for your credit or debit to anyone, not even a roommate or friend. Don’t carry your social security number in your wallet. If you lose your wallet (or it is stolen) you have basically handed over your driver’s license number, your social security number, and your credit card numbers. There is not much else an identity thief would need. Never verify account information via email, and only use your credit card on secure sites (they would have ‘https’ instead of just ‘http’ in the browser address window). Never leave your credit or debit card laying around in plain view. Treat your personal information with respect and keep it private.
Bill Pratt is a former credit card executive turned student-advocate. He is the author of Extra Credit: The 7 Things Every College Student Needs to Know About Credit Debt & Ca$h. Bill speaks at colleges to educate and entertain students about real-life issues in money, leadership and success. His goal is to help students succeed personally and financially so they can improve the lives of those around them.