Tips for Avoiding Debt

Credit Card Smarts

Keep your head about you when signing up for and using your credit cards. A $1,000 bill on a credit card that charges 15 percent interest--low by credit card standards--will turn into $2,100 in the 14 years it takes to repay if only the minimum payment is made each month.

To keep debte down:

- Find a card with a low interest rate. Credit cards these days can charge interest to the tune of 22 percent, but even students with low income can find them for as low as 16 percent. Shop around.

- Find a card with no annual fee. If only because many credit cards don't charge an annual fee, you don't need to pay one.

- Look for a card with perks you'll use. Many cards come with features like frequent flier miles, dollars toward music and musical equipment, free movie passes or restaurant and hotel discounts, that accumulate with each dollar charged. Find one that offers something you spend money on already.

- Pay the card off each month. Make a budget. Write down how much you make each week, with realistic amounts for personal costs like food, entertainment, clothing and entertainment. Try to think of the interest as what it really is: extra money spent in the long run.

- If you're only paying the minimum, make sure it's at least reducing the balance. Some credit cards have a negative amortization schedule, which means if you pay the minimum the company requires, your balance will actually increase each month because the interest is so high.

- Think of your cards as a tool. If you use them often but pay them off each month, you stand to earn perks as well as accruing a positive credit history. Though this may not seem like a big deal now, it will come in handy when you want to finance graduate school, buy a car, buy a house, etc. A negative credit history, on the other hand, can actually prevent you from making future purchases.

--Elizabeth A. Gudrais