Give yourself some credit

by Beacon Staff • February 16, 2011

In a 2009 study conducted by Sallie Mae, 84 percent of undergraduates admitted the need for more financial management education. So get over that mild arithmophobia and educate yourself. Because while age can be just a number, a credit score, balance, and APR can not.

College students have long been represented as carrying massive amounts of debt, especially those responsible for footing their own tuition bill. Most find that the easiest way to subsidize costs like books, food, and other supplies, is to put it on plastic.

Unfortunately, students are busy worrying about not failing out of school and forget to keep their finances in check. Some don’t know the terms of their credit cards and furthermore don’t know what those terms mean.

“I know APR stands for Annual Percentage Rate, but I have no idea what my APR is,” said Jusmine Martin, a junior writing, literature and publishing and print journalism double major.

APR could have a major impact on the actual cost of money spent. For example, according to credit.com, someone with a $5,000 balance with a 16% APR who makes a $125 payment each month would need 4.8 years and $2,000 in interest to pay off the balance. With the same balance and payment and a high 25% APR, the debt would take over seven years and $5,800 in interest to repay.

With the first APR, a balance of $5,000 would actually cost $7,000 to repay, and the second would amount to more than double the initial purchase, totaling $10,800.

“Credit cards are a tool, not a banking arrangement,” said Emerson professor Stanley Miller, a Certified Public Accountant and a former Chief Financial Officer at Hyde Athletic Industries and Harvest Time Bread. Miller teaches finance and accounting, a required course for business minors.

Aside from knowing credit card terminology, Miller advises that students check their credit score once yearly, especially if they have more than one card or make frequent purchases.

“I don’t know about my credit score. I just keep track of my expenses, not how I’m perceived by the bank,” said Jennifer Stanis, a junior communication disorders major.

Three major credit firms, Equifax, Experian, and TransUnion, compile the scores based on timeliness of payments, total amount of debt, duration of having a credit card, and other factors said Miller.

Online sites, like AnnualCreditReport.com, will check all three scores once yearly for free. Keeping an eye on these scores can serve as the motivation to make better use of a credit card or even identify a problem if one score is drastically different from the other.

“I hear that people are in debt, but I would never go there. We are too young to go there,” said Guy Ben-Aharon, a junior theatre studies major.

Ben-Aharon said he uses his card for purchasing books, plane tickets, and rarely anything else. He makes sure to pay his balance, in full, every month, as Miller suggests. But not everyone can...

So just remember, in the case of falling behind on payments, it’s possible to negotiate with the credit card company for a lower balance. Sometimes they would rather get partial payment now rather than no payment later, said Miller.

Miller stressed two things when dealing with personal finance: Consulting and communication. Professionals are there to help, he says, before reciting an idiom frequently repeated in his class, “you get what you negotiate, not what you deserve.”