Credit Counseling with
the Sudbury Community Service Centre
Credit: A Powerful Tool,
A Warning to Students
With summer (and graduation) upon us, you have probably received
your first (of many) credit card applications. Before you go wild
and max out your limit, take a moment to plan. The credit decisions
you make now will have a lasting impact on your credit rating in the
future.
Credit Education - The Key to Your Financial Future
We all live in a world that is pretty overwhelming, especially when
it comes to personal finances. Fact is, it costs a lot of money to
cover even basic living expenses: rent or mortgage, car payments,
insurance, food and student loans. Sometimes, the size of these
bills or your debts is bigger than expected. Learning how to manage
money is a necessary step in preparing for life after graduation,
whether you will be continuing your education or entering the work
force. Building and maintaining a good credit record is part of
securing a sound financial future.
Your Credit Rating
Your credit rating is based on the facts of how you have handled
your debt obligation, including any judgments, garnishment,
bankruptcies or unpaid loans. Most information regarding your credit
history remains on your file for seven years. It will show, even if
you are a couple of months late with a payment; so, it is important
settle your obligations to your creditors. However, positive
information is also recorded on your credit file. Making payments on
time and having no late payments, judgments or bankruptcies on your
file can help you with future credit, accommodations or employment
applications.
Be credit wise
You will find that credit offers vary widely. Each offer of credit
includes different features and payment plans. Be sure to research
these different options and choose the one that is right for you.
Creating a budget helps you keep within limits, make tough choices
and helps you say no. Turn what you can't afford today into a goal
for what you can afford in the future.
When you finally decide which option is right for you, here are a
few tips to help lower your credit card costs:
• Pay the full balance each month -- Paying the entire balance each
month will cost you nothing in interest. Paying the minimum prolongs
the time it will take you to pay off your balance and will cost you
a lot in interest. If you owe $2,000 on a retail card with a 28.8%
interest rate and you only make the minimum monthly payment of 4% it
will take you 14 years to pay off your debt and you will pay back
$4,700! And that is only if you never make another purchase on the
card.
• Choose a card with a low interest rate -- If you owe $1,000 on
your 18% credit card, it will cost you more than $180 in interest
over the year. If you switch to a lower rate card, you will save
money on interest owed.
• Use savings to pay credit card bills -- If you have $100 in a
savings account at 3% interest, you will earn a little over $3.00 in
one year. That $100, used to pay off $100 on an 18% card will save
you $18…six times the interest you would have earned in the account.
Another choice is the
use of debit cards versus credit cards. Misunderstanding about the
difference between a credit card and a debit card can also cause
problems for the uneducated consumer. Debit cards can offer many
advantages to consumers over cash, credit and cheques; however, it
is important to remember that when using your debit card, most banks
charge transaction fees that can add up quickly. It's is also
important that you keep in mind that although no cash actually
changes hands, debit cards mean you are paying now, so always be
aware of your bank balance.
Seek professional help
If you find that you are over your head, there is help close at
hand. The Sudbury Community Service Centre has been helping people
with debt and money management problems for over 30 years. We are a
not-for-profit, charitable organization and member agency of the
Ontario Association of Credit Counseling Services. Our professional
credit counselors help clients find appropriate solutions to their
financial difficulties and provide clients with budgeting, money
management and education on the uses of consumer credit.
Remember, credit is a privilege that can enhance the quality of
life. Proper money management is the responsibility of every Ontario
consumer. It is important to be aware of your current economic
situation and practice smart credit management. When used wisely,
credit is a very valuable tool.
So now…go wild, with restraint!!!
For more information contact the Sudbury Community Service Centre at
(705) 560-0430 or 1-800-685-1521.
