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How Much Does a Free T-Shirt Really Cost?

Credit Wise (featured column)
by Jennifer Wallis

The morning chill in the air and earlier sunsets mean that fall is quickly approaching. For most people, fall means changing leaves, the kids going back to school and football games. For college students, it means booths cropping up all over campus that are giving away free t-shirts or hats just for filling out a quick application.

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In the face of getting something “for free” college students may not whip out their magnifying glass to read the fine print or stop to think about what they are doing. Here are some things to keep in mind when they are passing out the free stuff.

What exactly is this application for? Whenever you receive a free t-shirt or hat from a credit card company, you are completing an application for a credit card. If approved, you will receive the credit card in the mail a few weeks later.

Will just filling out this application affect my credit even if I never plan to use the credit card? The answer is YES. If one booth is passing out t-shirts, another hats, and another gym shorts, you may receive a new outfit but you will also receive an inquiry on your credit report for every application you complete. An inquiry is simply a notation for every time you apply for credit. While one or two inquiries probably won’t affect your credit score much, more than three can send up a red flag to lenders. They will wonder why you are applying for so much credit and what you plan to do with it. Inquiries stay on for two years so make sure you actually want the credit card and not just the free stuff before you sign up.

Aren’t student credit cards a good way to build credit? They can be. If you don’t have credit and need to start building it, student credit cards can be a good tool. They typically come with lower credit limits and may have some benefits such as bonus rewards and low introductory rates. If you decide that a student credit card is the best choice for you, be sure to read the fine print to see what the interest rate (APR-annual percentage rate) will be after the introductory rate expires. A rate of 14% seems to be pretty standard for student cards. Make sure there is no annual fee or charge for using the card. Some credit cards come with a hefty transaction fee just for activating the card so be sure you understand the terms of the credit contract.

Why are the credit card companies giving away free stuff anyway? The credit card industry is a multi-billion-dollar business. Credit card companies are banking on college students future earnings potential so it may not matter much to them that you currently have little income or a steady credit history. Credit card companies pay millions of dollars per year for the rights to set up their booths on college campuses. In recent years, some colleges have begun banning credit card companies from their campus because of criticism from parents and students who may have gotten into trouble with credit.

Many college students sign up for the cards without realizing that they may be starting a cycle that can take years to escape from. I have heard numerous times from college students that they signed up for the card to get the free stuff and just planned to cut up the card when it came in the mail. Instead, they found themselves strapped for cash and discovered that they could use the credit card to supplement their income and improve their lifestyle. With the intention of getting a good paying job when they graduated from college, the students rang up thousands of dollars of credit. When graduation came, the high paying job did not and along with student loan payments coming due six months after graduation, they found themselves overwhelmed.

Since college and beginning a career can be stressful all on its own, the stress of debt may be too much for some. In recent years, in my home state of Oklahoma, there have been several college students who wound up thousands of dollars in credit card debt. Not knowing where to turn and completely overwhelmed by the stress of being in debt, they saw no other way out than to take their own lives. If you or anyone you know is in a similar situation, please know that there is help. In every state, there are non-profit credit counseling agencies that can help you develop a plan to get out of debt.  (As well as the resources available here at BetterBudgeting.com.)

The most important thing to keep in mind is that if you are not prepared and educated to begin using credit, skip the free t-shirt. Along with that little rectangle of plastic comes great responsibility. You have to commit to pay back, and on-time, everything that you charge on the card plus interest. If you decide you are ready for that responsibility, take it seriously and begin building your good credit history. It’s much easier to wait until the right time to begin building a good credit history than it is to get a credit card too early and spend years recovering from a bad one.

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Return to Credit Cards and Debt

Copyright © 2004 by Jennifer Delcamp. All rights reserved.

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