Which is better? Student loan or credit card debt
You need money to pay for college expenses this year. Will you pull our a credit card to pay for your books, or do you apply for a federal or private loan instead? Well, consider the below options.
- With a federal loan, your interest rate will be low (around 4-5 %) and all your payments will be deferred until 6 - 9 months after graduation. This will help put the money part behind you for now.
- With a private loan, the interest rate will be higher than with a federal loan but will still be lower than most of the credit card interest rates. In addition, you will only need to make interest payments until after graduation.
- With a credit card, the interest rate can be as high as 25%. Interest begins accruing almost instantly, and you need to begin paying off the bill in your next cycle.
This is not to say that credit cards do not have a place in your college life. It is good to have one national card (MasterCard, Visa, Discover) on hand to help you build a positive credit history and to provide security in case of emergency. When you decide to apply for a card, compare annual fees, interest rates, and introductory offers. There are plenty of web sites on the internet where you can compare the top credit cards. Spend some time learning about each of the credit cards and what they have to offer. And to keep yourself out of debt, try to
- Pay your balance each month to avoid interest charges
- Pay your bill on time to avoid late charges
- Avoid cash advances, which come with large finance charges and interest that begins accruing immediately.
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