By Jameson Filston, Campus Carrier Online Editor
College students often have mixed feelings about credit cards because they don’t understand how they work. In actuality, credit cards can be beneficial for students, but only when used responsibly.
Credit cards require extra maintenance, including paying off one’s debt each month, and have consequences like late fees for missing payments. If they are just another responsibility, and the average college student does not have a direct need for lots of credit, why should a student get a credit card?
“One nice benefit to responsibly using a credit card is establishing a credit history” said associate economics professor Lauren Heller. A credit card history is necessary when someone is ready to buy a house or car, and doesn’t have the money up front. However, Heller also warns that a credit card can pose a danger if used unwisely. She advises students to use a credit card for small purchases and pay off debt each month.
Shelby Koch, a freshman at Berry, decided to get a credit card after seeing her aunt’s roommate struggle to buy a house and a car without a credit score.
“I could make small purchases on the card and pay them off immediately,” Koch said. “I was never spending what I didn’t have, but I was building up that score.” Koch canceled the card after a couple months but says that it got her in the habit of paying it off each month.
Heller advises that you don’t charge any purchases that you cannot immediately pay. A credit card is not free money. You will have to pay everything. A credit card just allows you to pay the money later rather than up front.
Paying your card affects your credit score greatly. It is also important to regularly check your credit score.
A negative credit card history can affect you in many ways. Companies and banks will charge higher interest on people who are less responsible with their credit cards, and in some cases won’t lend money at all. That is why a bad history is worse than no history. A free way to check your credit card history is to visit http://www.annualcreditreport.com, which gives you a truly free report once a year.
Discover offers a student credit card that guarantees $20 back every year for students with a GPA of 3.0 and above. Similar offers from other companies also target college students. According to Heller, credit card companies want to attract the right type of students but have little way of knowing which students are responsible and which ones will not pay off their card.
“Grades are one way they can see the responsibility of a student,” Heller said. These incentives help credit card companies control their risk in credit card lending to unknown consumers.
Koch was careful to stay on track, but if she got irreparably off track she was confident her father would help her out. However, the best strategy for credit card management is to be diligent and stay on top of your payments. Heller says that the main reason to have a credit card in college is to build your history, so there is no need to make many purchases with your card.
Koch says that this is easier said than done.
“You don’t realize what you are spending,” Koch said. “Five dollars here, twelve dollars here, and it adds up really quickly.”
Credit cards can help college students down the road when used responsibly, but can have lasting consequences if used incorrectly. Whether you decide to get a credit card in the future or already own a credit card, make sure to use it with care. Good credit will be rewarding in the future but bad credit can set you up for failure.