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Meet Pam
- Age: 21
- Income: About $75 per week, through her part-time work-study job
- Schooling: Currently a senior at a 4-year public university
- Major: Communications
- Loan debt: $12,000 federal
Pam's situation
Pam recently received a credit card promotion that advertised a free mp3 player if she signs up for the card by the end of the month. Pam doesn't have a credit card or an mp3 player…
Read Pam's story
Pam is seriously tempted to get a credit card. She tells her mom she wants it just for emergencies, but she knows she'll probably use it for other things too, like spring break.
Her mom says she can't handle the responsibility. But she'll be able to pay for it. She's graduating soon, and she plans to make a lot of money. Pam's going to be a Web editor. And those internet jobs have super high salaries, like $60,000.
All of Pam's friends have credit cards. They're able to spend more than she can, since she's limited to cash. She wants to have the financial freedom to join them on their adventures.
And how cool would it be to get a free mp3 player? Free—she can't believe it. She's going to download all sorts of music. She can't wait!
Pam CAN deal with it
- Pam needs to weigh the pros/cons of a credit card. A free mp3 player may be great, but that is not enough of a draw to get a credit card. The primary benefit of having a credit card is to build credit, not buy things. If Pam just wants the card to make purchases, she may find herself deep in debt pretty quickly. Misuse of her credit card will end up on her credit report for 7 years!
If Pam decides she does need a credit card, she should ignore the promotional gifts and look for a card with a low interest rate that is fixed, not variable. - Pam must set realistic salary expectations. If Pam were to visit salary.com, she'd see that she's more likely to make $25,000 than $60,000 in her chosen field. Salary.com is a great resource for finding out the average starting salary for different careers.