The Pros and Cons of Getting a Credit Card in College

While your credit score might not seem important now, someday it’ll determine what apartment you can rent, what loans you can take out, and whether or not you can buy a house. Having a good credit score in our society can really make life easier, and it’s often a good idea to start early.

This is why we often discuss the best credit cards for college students on here and different ways to use credit as a young person.

Good credit will help you:

• Lower your insurance rates.
• Obtain your first job.
• Purchase your first car.
• Purchase your first home.
• Rent your first apartment.
• Sign up for a cell phone plan.

These are all financial activities that you will want to partake in when you’re done pouring over books, writing research papers, and completing scores of problem sets. Every step you take in college helps you build your future, so why not think about credit too? Planning for your financial stability later in life isn’t geeky, it’s brilliant. You can start an online business or master your credit at an early age.

However, some people are of the mindset that college students are not ready for the responsibility of a credit card because they don’t understand how much damage simply making a late payment can do. This is not an easily dismissible concern. While credit cards can benefit a college student greatly, they can also cause serious financial harm to their future.

Therefore, before making the decision to open up a credit card, be sure that you know exactly what you’re entering into. Read the fine print. Shop around. Talk to your parents and your local banker, and whatever you do pay your credit card in full on time. While the minimum monthly fee may sound appealing, paying it can destroy your credit and your finances.

Here are some of the pros and cons of having a credit card in college..

What are the pros of a student credit card?

• Having a credit card will allow you to establish good credit early on in life. This will make it easier when you debate between buying or renting a home.
• There are many fantastic budgeting programs available to credit card users that allow you to separate your expenses into categories such as food, entertainment, and clothes. This can allow you to see where most of your money is going.
• If you find yourself in an emergency situation a credit card gives you flexibility when you don’t have cash available.
• Carrying cash is less necessary when you have a credit card, which may make you feel more secure.
• You can make secure purchases on the Internet with a credit card.

What are the cons of student credit cards?

• It’s easy to lose control, overspend, and end up paying off a credit card for years after graduation.
• If you don’t stay up on your payments your credit score will be negatively affected.
• Spending too much on a credit card means they have more to pay back and less money to save for the future. Savings are also a very important lesson for college students to learn.
• Be wary of high interest rates. Often credit card companies take advantage of college students by giving them small perks and then charging the highest allowable interest rates.
• There are often annual fees for credit cards. Most students don’t understand how a credit card works.

What about Student Loans, are they better than credit cards?

Student loans are another important option for college students. Student loans also allow a student to develop good credit once they start paying the balance off after graduation. The benefit of student loans verses a credit card is that student loans are a fixed amount of money and also have fixed interest which is always lower than a credit card. The fallback is that you don’t begin to establish a credit score until after you graduate.

Final thoughts on student credit cards and how do credit cards work…

Take a look at all of your options, read the fine print, and consult with an adult who you trust to guide you in making sound financial decisions. Getting a credit card in college is risky business, but can have its payoffs. Just make sure that you know what you’re getting into before you dive in head first.

This was a guest post from Sarah.

1 thought on “The Pros and Cons of Getting a Credit Card in College”

  1. Well my parents had a fair amount of credit card debt so in getting my first card, I decided to treat it the same as if I was spending the money I had to back it up in the bank.

    I also realized in college I would burn through cash I had in my wallet much faster than I would with my credit card. I guess that is the opposite of what I hear from most people, but I found it very easy to be dropping cash on a night out with friends or on snacks at a football game. Its much easier to claim your broke when you have no cash in your wallet. Simply by having transactions stored electronically I knew where my money was going vs. looking in my wallet to find Lincoln sitting there alone where earlier that week there was a 5 man Jackson party. I now use mint to aggregate all this data so I can get a much longer term view.

    One last thing, usually sit on spending decisions for a while before I actually bite the bullet and buy something. Part of that is due to just enjoying waiting for a good deal to pop up on deal aggregators like slickdeals. Plus, I try to get a lot of life out of electronic purchases (my biggest weakness) by reusing them in various setups. This laziness toward impulse buying has really helped to keep me out of credit card trouble.

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