Should I Get a Credit Card in a College?

ElitePersonalFinance
Last Update: February 4, 2021 College Students Credit Cards

So, you’ve finally crossed the 18-year threshold into adulthood, and you’re working toward completing a college degree. At long last, you can now legally get your very first credit card – but is it wise to make this decision while you’re still in school?

This is a question that pretty much every college student asks themselves.

Whether you have a job while pursuing your higher education or are still just getting help from your family, signing up for your first credit card can certainly be a good idea. But you have to know that it also comes with some risks for you.

Benefits of Getting a Credit Card in College

  • The earlier you start building your credit history, the better.
  • You can start taking advantage of rewards/cashback programs.
  • Convenience.
  • You can use them for emergencies.

The Risks

  • A lot of college students quickly accumulate high-interest debt.
  • Irresponsible behavior can hurt your credit history very early, affecting your ability to get loans during early adulthood.
  • Cosigners may be stuck dealing with your unpaid credit card debt.

Figuring out if you will sign up for a credit card while you are still a college student is a choice that many young people have to make. The decision really comes down to your personal spending habits and individual financial situation.

First, let’s start with why getting a credit card when you’re a college student can be a good thing.

Getting a Credit Card in College: The Good Side

  • Starting your credit history

Credit cards are one of the easiest ways to start building up your credit history, which determines your credit score. It isn’t easy to get an apartment, getting a car loan, and a whole host of other things without having an established credit history – so starting early is definitely a good path to take (as long as you don’t overspend and pay your bills on time). Also, your credit history’s length makes up 35% of your FICO score, so the earlier you start, the better.

  • Reaping the rewards of responsible credit card use

While credit cards geared toward college students don’t typically have the best rewards programs, there are still a few good options where you can earn cashback and rewards points. Here are a few examples:

  • Capital One’s Journey Student Rewards Card gives its cardholders 1% cashback on all purchases, which rises to 1.25% if you pay your bill on time.
  • Citi ThankYou Preferred Card for College Students offers double points on dining and entertainment purchases.
  • Discover it card for students allows cardholders to earn 5% cashback on up to $1,500 each month.

Convenience and Emergencies: Sure, you can use debit cards like credit cards in most situations, but having a credit card in your wallet can come in handy. For example, some companies, like car rental or hotels, only accept credit cards to complete a reservation. This means that you can’t pay with a debit card there. Having an additional form of payment in case you lose your debit card is also a bonus.

In addition, emergencies happen every once in a while, and sometimes we don’t always have the cash in our bank accounts to cover the costs. That’s why having a credit card (that isn’t maxed out) on hand is very helpful and may get you out of a pinch soon.

Getting a Credit Card in College: The Bad Side

You can only truly gain the benefits of having a credit card in college if you are using it correctly and responsibly. If you aren’t careful, you may ruin your finances before you even graduate. That’s why holding yourself accountable for good spending habits is crucial. Don’t make the following mistakes, and you will be golden.

  • Debt can pile up quickly

So, you suddenly have a bunch of available credit to spend, and you are surrounded by temptation – like buying new clothes, taking a weekend trip, upgrading your furniture, etc. If you are the type of person that doesn’t have self-control when it comes to your spending, then maybe it’s not the best idea. If you aren’t sure, go for a lower limit card.

It’s a slippery slope. Your credit card balance may get closer and closer to the maximum, and that debt can stick around for several years if you don’t manage it early. You definitely don’t want to start your credit journey on that footing.

  • Your credit score can lower

If you open up a college credit card and rack up a ton of purchases while not paying your bill on time, then your credit score is going to drop. That’s not the first thing you want to happen when your credit history begins, so being responsible with your spending and bill-paying methods is absolutely critical if you decide to get a college credit card.

These unintended consequences can be even worse if they start to affect other people – if a family member co-signed your credit card account, then they will be stuck with your debt should you fail to pay. You need to be especially careful if your credit card account has anyone else’s name attached to it. In fact, if you need a cosigner and you know you don’t have the best financial habits, maybe it’s best to wait until you open up your first credit card until after college.

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