Ken Cyree. Photo by Kevin Bain/Ole Miss Digital Imaging Services
Ole Miss business school dean shares sage financial advice
America’s collective unpaid credit card balance sits above $1.14 trillion, but that doesn’t mean young people – including college students – should be afraid of having one in their wallets, according to Ken Cyree, dean of the School of Business Administration at the University of Mississippi.
Credit cards can help young people build their credit profile when used responsibly, said Cyree, a professor of finance and Frank R. Day/Mississippi Banker’s Association chair of banking.
“The problem occurs when students get (credit cards) and then pay for things that they really didn’t want or need,” Cyree said.
“So, that burger on the Square for $30 might end up costing you $200 after you pay interest on it for years and years and years.”
Using a credit card to purchase things such as groceries and gas or to pay routine bills, and then paying the full credit card balance off each month is one way to swipe responsibly and still build credit.
Opening a line of credit for emergency uses only is another way to build credit, but Cyree warns that young people must be diligent about defining what qualifies as an emergency.
“The problem is that a lot of people believe emergency is, ‘It’s Thursday night, and I need to go out to the restaurant or buy something that I think I want,’ and then they don’t have the discipline to pay attention and not overspend.”
Despite the “buy now, pay later” structure of credit cards, creating a plan for usage can deter impulse purchases and overspending. Budgeting to resolve the card balance each month is also key.
“Then, your interest rate is zero,” Cyree said. “The way that credit cards work is they charge you for the balance you don’t pay off.”
In some cases, debit cards can help increase credit scores.
Young people managing an affordable, on-time car payment can also build healthy credit profiles, without opening a credit card.
“The bottom line is if you spend less than you make, no matter how much you make the rest of your life, that’s the secret path to financial success,” Cyree said. “It is the golden rule.”
By Marvis Herring
