07.27.11 | Do I need a credit card for college?
Many students are bombarded with a variety of credit card offers and advice, but it can be difficult to weed out the good information from the bad. Some people preach that credit cards are evil and that there is no need for a student to have one. Other people say that every person over the age of 18 needs to have a credit card. So which is correct? Should students have a credit card or not?
First, I should mention that due to some fairly recent changes, students can no longer obtain a credit card without either a) proof of income or b) a cosigner. This ensures that students cannot get into too much debt without a means to pay for it. While for parents, it can be scary giving your child a card, here are some ways students can benefit from having a credit card.
Why credit cards can be beneficial
- To learn responsible spending – This is the most important part of having a credit card. Credit cards get a lot of negative attention because of debt, but if students learn responsible habits early, the negative effects are 100% avoidable. A student’s first card should have a low limit, and be paid off on-time every month (not just paying the minimum). Prepaid cards are great because there’s only a set amount the student can spend. By establishing good habits early, students can actually benefit from having a card, which brings me to my next point…
- To build credit – Building credit is extremely helpful for students later on in life. Having a strong (and lengthy) credit history can set students up for their post graduation lives. With good credit, students can obtain student loans at lower rates, finance new cars, and even buy a house. (Note: Debit cards do not build credit. While they do help students become financially responsible, they are not a line of credit like a traditional credit card.)
- To use in an emergency – Credit cards can come in handy when you’re in a bind. If you have an emergency (such as running out of gas), credit cards can be a lifesaver. Plus, for students who travel a lot or plan to go abroad, they are a great safety net for unexpected travel issues.
Why credit cards can be dangerous
- The temptation to spend is greater than it is with cash. It is much easier to swipe a piece of plastic than it is to hand over a pile of bills.
- Missing a payment or building up too much debt can seriously harm your credit score.
- You could develop bad spending habits at a young age.
What it boils down to is that as long as you exercise self-control, and spend only what you can afford to spend, having a credit card is actually a good thing. If you are someone who cannot exercise spending restraint then having a credit card could hurt you. Credit cards are not inherently bad, and when used properly, can help students get through the college years and emerge financially strong with a solid credit background.