Should You Have a Credit Card in College?

I remember when my family dropped my older sister off at college, seeing booths full of exited college students trying to get other college students to sign-up for credit cards.  To me, at the time, credit cards were the ultimate sign of financial irresponsibility. My dad would scoff at the students anytime one of them approached my sister.

Now that I have successfully made it through college myself! Let me tell you why getting a credit card is good, but where it can be very bad.

Benefits of having a credit card

It’s helpful to have a credit score. It can help you with getting a good deal on loans, buying a house, or even landing a job. It also enforces good spending habits and teaches you to track your cash inflow/ouflow.

Although your first year is spent in the dorms, by your second and third year you may wish to move off campus. Having a good credit score is very helpful in securing an apartment in the impacted college communities. You can use your parents credit, but if they have bad credit it may be better to use your own.

Having a credit card for longer increases your credit score.  The longer your line of credit has been open, the higher your credit score. Starting a credit card in college gives you a longer credit history which looks good on your credit report.

Negatives of having a credit card

If you’re not careful, any debt you have could quickly grow.  Many college students already have to worry about student loans, and don’t need the added stress of credit card debt.

Some people get so caught up in getting the rewards from their credit card they do not realize how much more they are spending until they can’t pay it off.

So… Should you have a credit card in college?

You should get a credit card if you follow these criteria:

1.) You have a dependable source of income. (Or leftover income from a summer job.)

2.) You promise yourself to use it regularly, but sparsely.

Do not get a credit card if you want to use it to fund your way through college and expect to pay it off later.  If you have had trouble with excessive spending, practice budgeting yourself for a few months before you open a credit card.

Many students fall into the trap of buying expensive things in their last few months of college because they expect to easily land a job when they finish school. Even with a college degree, it can take months to find the right job.

Going into a job search with debt makes you more likely to pick the first job that comes your way. Instead, by being debt-free you have time to search around for a higher paying or more emotionally rewarding job.

What about for emergencies!?

Ideally, a credit card should not be your go to in case of an emergency.  Find a way to get a job and set aside money in a savings account in case of an emergency.  If you have an emergency that is going to cost you a few hundred bucks, the last thing you’re going to want to do is use your credit card and have to deal with the interest payments.

Having a credit card for emergencies makes sense, but that does not mean you should rely on it for an emergency.

Other Options

Become an authorized user.

If you are nervous about handling your first credit card, you can become an authorized user on your parents credit card. Before doing this however, you need to have a very serious discussion with your parents about how you will use the credit card and how they will use it.  Parents can be quick to assume their children with start making excessive charges, but if your parents start missing payments it will hurt your credit score too.

1.) Ask your parents to tell you their credit score.  Do your research on what makes a good credit score to decide how well your parents use their lines of credit.  Do not become an authorized user if you don’t trust your parents to make payments.

2.) Set a budget.  Have your parents give you a spending limit. This will get you into the habit of tracking how much you spend on a credit card.

3.) Know when to cut the cord. You can’t be on your parents credit forever.  Once you feel comfortable with your credit card, it’s time to think about opening your own.

Get a secured credit card.

Did you know there is more than one type of credit card?

Secured credit cards require you to put down a deposit. The size of your deposit will decide how much credit you can draw from. For example, if you put down a $300 deposit, then you will have a $300 credit balance each month.  Forget to pay, however, and the bank will take your deposit as collateral.

Although losing a $300 deposit may seem like a lot of money, trust me, it’s better than facing the compounding interest on a regular credit card. After using your secured credit card, you can upgrade to a regular credit card.

Final Thoughts

A credit card is a tool. Just like a saw or hammer, you want to know how to use it before you start building. Build up your financial IQ before you apply for a credit card. Practice good saving habits, understand how interest compounds, and have some income.

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