I got my first credit card when I was 18. For me, it almost felt like a passage into adulthood. After all, I had witnessed my parents use their credit cards on a fairly regular basis. It just seemed like the thing to do.
I saw absolutely no reason why I shouldn’t get one.
The only thing I worried about was being able to cover the monthly payment, and since the minimum payments were so low, that didn’t seem to be a problem.
So, I took out the first three credit cards offered to me. Within a month I had each of them maxed out. If you were to now ask me what I charged on those credit cards, I couldn’t tell you.
I didn’t start getting interested in personal finance until I was about 20. Luckily, I still had just those three credit cards at that time. The combined balances totaled around $2,500, so paying them off didn’t take too long.
For me, getting a credit card at a young age was a horrible idea, but since we’re all different, let’s look at why or why not you should have a credit card in college.
The Cons of Having a Credit Card in College
The biggest con to having a credit card in college is that you have access to credit!
Credit card companies charge outrageous interest rates. The $500 you charge on a credit card could turn into thousands if you’re only paying the minimum payment. And once you get yourself into credit card debt, it can be hard to get out of it.
Not to mention, having high debt to credit ratios can wreak havoc on your credit score.
If you’re thinking of getting a credit card for the sole purpose of buying useless items like I did, don’t do it! You’ll only get yourself into trouble.
The Pros of Having a Credit Card in College
If you’re responsible and are planning on opening up a credit card for the sole purpose of building your credit score, then go for it.
Credit cards are not evil. In fact, they can be a very useful tool if they’re used correctly. If you plan on taking out a credit card and putting a small amount of money on it that you pay in full each month, then it can help you build your credit.
Credit Card Etiquette
If you want to use a credit card to its full potential, whether that be for rewards or to build your credit score, there are a few things you should do:
- Find a credit card without an annual membership fee.
- Pay your balance in full every month.
- Make sure that you’re not subconsciously overspending just because you’re paying with plastic. Be sure to stick to your budget.
- Do not use a credit card for emergencies, that’s what an emergency fund is for. (If you don’t have an emergency fund, you need to work on building one now.)
If you can follow these tips, you’ll be able to easily reap the benefits of using a credit card while in college.
What do you think — is it a good idea to open a credit card while in college?