ISU Financial Counseling Clinic director offers students tips on avoiding credit card debt

AMES, Iowa -- New students find the whole experience of college to be educational, right down to managing their finances for the first time. And some learn the hard way about the dangers of credit cards.

Doug Borkowski -- director of Iowa State University's Financial Counseling Clinic, which provides credit management counseling among its services -- says students should do a little prudent planning before using a credit card. In his face-to-face meetings with ISU students regarding their financial matters, he often tells them to start the planning process by making a budget -- tracking spending for at least a month.

"They need to know what they are spending their money on," he said. "This is the start of a budget. Now they have some more accurate numbers to work with."

He says setting goals related to finances is also very important. "It certainly can help to show how saving to make a purchase -- and not just spending impulsively -- can help in the long run," he said.

Borkowski says students have to also understand wants versus needs.

"If you are considering buying something, ask yourself, 'Do I need it or is it just a want?' Do not buy it right at that moment," he said. "Leave the store and think about it and see if you decide to come back and purchase the item at a later date."

Borkowski advises students to use a debit card first, when it is not a line of credit, to see how they can manage their spending habits. "If you overspend with a debit card and get an overdraft, you are not ready for a credit card," he said.

Since most people find it harder to actually hand over the money rather than just swipe a credit card, he recommends that students try cash first instead of plastic.

"I have found that if a young person understands that the same amount of money they pay every month for a minimum payment on their credit card could potentially make them a millionaire by the time they reach 65, they might think twice about using that credit card," he said.

And once parents send their kids off to school, they're not excused from the money management education discussion.

"Parents need to take the time to talk to their children," Borkowski said. "If they (parents) are spenders, they should tell their children 'You do not want to live paycheck to paycheck like we do.' If they are savers, let them know how that has worked for them."

Borkowski says that students need to be educated to the fact that if they have too much credit card debt or miss credit card payments, they can ruin their credit scores and have a very difficult road to credit repair over their lifetime.

"A bad credit score can mean not being able to buy a car or home. It also can mean higher interest rates and future credit costing you more," he said. "I think the credit card issue is about scaring students some, but still letting them know that when they are used properly, credit cards can be a good financial tool."