But where does that leave starving college students and their families, both of whom struggle to help make those tuition payments? The anemic economy, along with the less frequent use of cash makes credit a fact of life for any college student. So just what is exactly the best use of credit for a college student? Let’s find out by taking a look at the four most popular types of credit; debit cards, bank account debit, layaway, and the good old-fashioned credit card.

Debit Cards

Debit card used to be the best payment option, next to writing a check or paying with cash, but unfortunately that’s changed. Because federal regulations mandate that banks can no longer charge merchants any more than 21 cents per credit card transaction (down from an average of 44 cents per transaction), banks have decided to make up that loss by charging the consumer instead. Starting October 1, 2011, Bank of America will charge a $5 a month for the use of a debit card ($5 per month total, no matter how much or how little you use it). And other banks are following suit. Starting in 2012, Chase and Wells Fargo will start charging $3 per month for the use of their debit cards.

The solution? Use your debit card as an ATM card only. ATM use at your own bank is still free. This means you’ll have to plan ahead to get the cash you need to pay for things, but it beats paying an extra $60 a year for an account on which you probably already pay anywhere from $10 to $15 a month.

Bank Account Debit/Automatic Deposit

For bigger purchases or regularly recurring bills your best option now is to either go old school and write a check, or set up direct payment from your checking account. Many banks still offer the direct payment service for free if the payment is initiated from the creditor’s end; meaning you give your phone company, for example, your bank routing number and account number and then they simply debit your account.

The downside is if you do monthly auto-pay, you have to make sure you’ll always have money in your account to cover the payment. College students are notorious for living hand-to-mouth, so assuming money will be in a checking account when needed could be dicey. Instead, you can set it up so that your bank account is not debited until you actually initiate it from your creditor’s website (or by phone).

Layaway

Okay, Walmart is responsible for bringing back this dog of an option. Back in the 1930s (before credit cards) many stores started allowing patrons to make payments on merchandise, keeping the merchandise until the customer paid it off (usually in a month or two). Initially, the merchant did not charge a fee, so it was a pretty good deal. This practice was called layaway, but finally died out in 2006 due to the credit card.

However, Walmart is bringing layaway back, but not because they want to help financially strapped families. As the New York Times points out, with Walmart’s $5 layaway fee you’re actually paying way more for your merchandise than if you simply bought it with a credit card, unless you put hundreds to thousands of dollars of merchandise on layaway, which Walmart won’t let you do.

Again, the best option is to just live within your means. The layaway option is not for books, rent, food, or tuition. It’s for things you can probably live without like cheap clothes, CDs, or electronics. If you can’t afford to pay cash for luxury items, then put them on your wish list.

Credit Cards

With all the restrictions being put on banks by the Credit Card Reform Act, using a credit card is not as dangerous as it used to be. (Although, you still need to control your spending.) When paying for big college expenses (like tuition, books, dorms, food) a credit card is probably the best way to go, unless you can pay cash by writing a check or use free direct deposit into your creditors’ accounts. The interest you pay on a credit is still lower than to use a debit card.

So as it stands now, the cheapest way to use money while in college is to get cash out of your bank with an ATM card, write a check, or use a credit card. In all cases, getting some online banking/accounting software like Intuit’s Quicken is a great way to keep track of your spending. Then again, you can always keep it in a cookie jar. Last I check that option is still free.

Consider private college

Some people believe that if you forgo the high-priced private universities, you can save some bucks. But is that really the case? The simple truth is that many private colleges give great financial aid in the form of grants and scholarships. They can do this because of their generous alumni who reinvest in their alma maters. Many times, you could end up paying less at an expensive private university than you would at a local state college.

Choose regular decision

If you apply early decision, letting colleges know that they are your first choice college, you lose your bargaining power. That bargaining power can mean huge dividends when it comes to financial aid. If your teen is accepted to several colleges and each offers them some grants and/or scholarships, you can use those offers to negotiate more aid with the college of your choice. Early decision robs you of that negotiation.

Take Dual Credit and/or AP Classes

If you take dual credit classes during high school, you can get college credit at the same time you receive high school credit. In many cases, you can get enough credit to enter college as a sophomore. Additionally, if you take AP classes, be sure to take the AP tests which many colleges count as credit if you test well. By choosing either option, you can save on the cost of tuition. For more information on how this works, you can order or download a free copy of the National Center for Education Statistics’ publication: Dual Credit and Exam Based Courses.

Work during college

Studies show that working during college helps you with time management and organization. If you work while you’re in college you can use that money for textbooks, living expenses, and even put some it toward tuition expense. It makes better sense to work than borrow and pile up your student loan debt.

Don’t buy new textbooks

With all the websites offering textbook options, think before you plunk down top dollar for those new textbooks. Consider buying used, renting, or even downloading e-textbooks. All these options will save you hundreds of dollars every semester. Barnes and Noble has made this easy by providing a link where you can search for new, used, rentals and e-textbooks all in one location.

Live at home or become an RA (Resident Assistant)

Room and board can be a huge portion of your college expense. One option is to live at home if the college is within driving distance. If you aren’t interested in living at home, here’s another option: apply to become an RA (Resident Assistant). Some colleges allow RA’s to live rent free (which means a huge cost saving on room and board). Others give substantial discounts.

Use your student ID card for discounts

That student ID is useful for more than just getting into your college dorm. Use it everywhere for substantial discounts at restaurants, on clothing, on books and even groceries. Ask local businesses if they honor the student ID if you don’t see a sign at the cash register or drive-thru.

Consider community college

Community college is considerably cheaper and can offer you an opportunity to get some of your core subjects out of the way. The difference between $3000 for a college credit at a university and $300 a credit at a community college can add up to substantial savings. Don’t forget to check with your college first and make sure they will accept credits from the community college.

Take a look at your meal plan

Most students don’t need the full meal plan (3 meals a day). If you knock your meal plan down to the minimal one meal a day you can save thousands of dollars per semester. Most college students roll out of bed in the morning, grab a red bull or coffee, snack during the day and often order out late at night. Why pay for three meals a day when you don’t eat them?

Graduate in three years

Imagine the money you can save if you graduate in three years instead of the 4-6 years required by most college students. How is that done? First, if you were wise and took those dual credit or AP classes it’s possible to chalk up 12-15 credit hours before you ever set foot on campus. For some excellent tips on why and how to graduate in three years, check out this amazing post by a guy who advises parents on how to pay less for college: How to Graduate in 3 Years!

The economy has forced all of us to tighten those belts and eliminate wasteful spending. These 10 tips can potentially save you hundreds and even thousands of dollars on college costs.

Do you know some other tips that will help others cut their college costs? Please share them here!

1. Borrow Textbooks. If you can’t borrow, buy used. If you can’t buy used and have to buy new textbooks, check for an “international” edition. International editions are nearly identical, except for maybe some Chinese characters on the front, and it will be exponentially cheaper.

2. Brew your own coffee. Your daily latte, cappuccino, or mocha from a coffee house will run you between $2.50 and $3.50. Seven days of that routine costs you $17.50 per week, $70 per month, and around $280 per semester. Making your own coffee or drinking less could save you $500 over the course of a year.

3. Kick the bottled water habit. Support your local tap water and drink for free. Get a filter if you want better-tasting water.

4. Two words: Ramen Noodles.

5. Decline extended warranties on computers. Your computer should be under manufacturer’s warranty for the first year anyway. Companies dupe you into believing the plan is worthwhile and become rich off your extra cash.

6. Don’t buy ink cartridges from the manufacturer. Instead, purchase cartridges online where you can compare prices and get free shipping. Better yet, refill your own cartridges (refills can cost as little as $5 per cartridge).

7. Save money on utilities. Living on an upper floor will typically keep you warmer in the winter, but it’ll get hotter in the summer. So, if you go to school in a region where winters are longer, then try to get a room on the upper floor, otherwise live low. Also, try to find an apartment where utilities run on natural gas (stove, hot water heater); it’s generally more cost-efficient.

8. Don’t shop hungry. This goes for any kind of shopping. If you’re in the grocery store, you’ll grab more and spend more; if you’re somewhere else you’ll probably spend more than you planned getting something to eat. Carry a snack in your purse or backpack.

9. Get your haircut at a cosmetology school. They charge much less for cuts, highlights and color in exchange for the use of your head.

10. Two more words: donate plasma.

Finally, there was one idea that didn’t make the list but which — I know from personal experience — is a gold mine. Get a Costco membership. The reason for the membership is not so you can buy in bulk, which, frankly, can mislead customers into thinking they are saving more than they really are. Rather, the real perk of membership is access to the free samples.

Let’s be honest: a Saturday morning trip to Costco is a trip to an all-you-can-eat smorgasbord. You can taste a variety of cuisines without ever having to commit (like you do at a restaurant). That’s the beauty of samples — you never get bored. If you don’t like something, toss it in the garbage. On the other hand, if you really like something, take a lap around the aisle and get back in line for seconds or even tenths (believe me, it’s possible).

Truly, there’s no better place to get full and explore the subtle nuances of your palate than Costco. And the best part of it all is that you can go as often as you want — every Saturday or every day. Trust me, whatever you invest in your annual membership will be more than repaid, even if you have to earn it back by the tablespoon.

What is your best money-saving tip?

ABOUT THE AUTHOR

Benjamin Welch has been a college instructor in writing and composition for nearly six years. When he’s not teaching or playing golf, he offers advice for students seeking information about online education and online degrees.