Credit Cards - An Easy Way Out or a Downward Spiral?

For many students, University is their first time living away from home, and the buzz that comes with having over £1000 sitting in your bank account can often be too much to handle. Many students blow much of their first loan instalment in a matter of weeks, and find themselves living out of their overdraft for the rest of their degree. How to manage your finances is an important learning curve, which everyone will need to face at some point in their lifetime. Although, how manageable is this at university?

Many students can find themselves with no money left and nowhere to turn. The only solution to their woes can seem to be to visit their local bank to extend their overdraft.

Part of the problem has to be how easy it seems to be to acquire a loan or credit card. Whilst advertisements shown by banks may paint a rosy picture, they do not discuss the downsides. It is expected that you will independently read the terms and conditions. Although how many of us actually have? A key question is whether this should be enforced more thoroughly.

It may be difficult to pass up a quick fix to a financial problem, especially when your debts are affecting every aspect of your life, and pop-ups plague your P.C. advertising credit. Should limitations be placed on banks and the way they target potential customers? Junk food, smoking and drinking are now all subject to post-watershed advertising so not to appeal to vulnerable children. Credit card companies could be placed under the same restrictions to prevent them preying on susceptible adults.

Getting a credit card has never been easier and with many students finding themselves with no money and nowhere to turn, a tempting quick fix is to take out a credit card. Simply entering ‘Credit Card’ into Google gives you 178,000,000 hits - with many immediately offering 0% interest, 0% purchases or discounts for their company. No obvious or immediate warnings are displayed as to what happens should you not make your repayments on time.

It can be argued that it is an individual’s choice whether to succumb to the pressure of ‘free’ money. Some may argue that credit cards can be managed in a sensible way, but taking time to understand the terms and conditions is essential. Another way of avoiding excess fees is to simply make payments on time and not spend more than you can afford. However, this is often easier said than done.

Consumers should remember that debt will increase as more charges are applied. For many, the quick solution to a lack of funds seems too great an opportunity to miss. Credit cards appear to be an easy buy out, and allow spending without thought. Additional charges can lead many, including students, into a worse situation than originally thought.

In a recent study, universitiesuk.com found that 81% of students felt that lack of money is one of the worst aspects of being a student. Shockingly, 84% felt that the prospect of debt deterred entry in higher education, with 83% think that debt is one of the worst aspects of going to university.

In addition, the BBC found that students graduating in 2005 expected to leave their university with £7,561 of debt, with many placing the figure closer to £12,000. With figures like these, the hype regarding lower entry applications to universities seem well founded. It appears prospective students are becoming increasingly aware of the amount of debt they will be greeted with upon finishing their degrees.

It is important for students to remember that as hard as it may be to turn down your fourth night out that week, you may appreciate the few extra pounds a little later down the line. Credit cards may seem to be the easy answer and an easy way out, but the quick benefits are often outweighed by huge charges that can easily be overlooked. Not only can missing a payment mean that you are subject to excessive charges. You may also find yourself with a poor credit rating, which can affect you later in life, even for taking out a mobile phone contract.

Is it time that greater restrictions are placed on obtaining a credit card so that our country’s level of debt does not continue to spiral out of control?

Free, confidential advice can be obtained from The National Debtline (0808 808 4000).