the students at Fisk who were from households with an income of $55,000 or below were [under] pressure to send money home and took on more debt than they should have.”
Mike Schiano, vice president of outreach for the Orlando, Florida-based nonprofit InCharge Education Foundation, explains that if credit cards are maxed out, a sudden reduction in household income due to a layoff or illness leaves a family with nowhere to go except to even costlier sub-prime and predatory lenders, which only adds to the problem. He says that a credit rule of thumb is to not purchase anything you can’t pay off in 90 days.
Tahira K. Hira, a professor of family finances and consumer economics at Iowa State University, reminds consumers that credit is “a tool for doing financial transactions, but not for spending money that you don’t have.” She stresses that to improve credit management, consumers should keep only a few credit cards and use them for convenience — not for borrowing. “Using credit cards isn’t a bad thing; having high balances are,” Hira says.
Karlene E. Bowen is Fair Isaac Corp.’s client relationship director in Jacksonville, Florida. She says studies show that good financial management for African Americans requires actively tracking credit card usage and considering it a portion of overall net worth. “Focus on paying your bills on time and not using all of your available credit. If you’ve had late payments in the past, don’t despair,” Bowen says. “Just be more diligent going forward.”