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Credit Cards and College: An Easy Decision

Some experts say college freshmen should have credit cards. They are wrong. Responsible or not, the lessons are worth the pain.

Written By: Michael P. Lux, Esq.


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Putting a credit card in the hands of a college student might seem like a risky decision.

Interest rates on credit cards are notoriously high. Getting out from under credit card debt is often a major financial obstacle.

However, getting a credit card is still essential for most college students.

Credit Card Benefits for College Students

Many credit cards include perks for users like purchase protection, miles, points, or some other reward. These benefits can be valuable, but they are not the reason that college students need to get a credit card.

The biggest benefit for college students is establishing a line of credit that will age with the student.

Credit age is a significant factor in determining credit scores. For many college students, a student loan is the oldest item on their credit report. When student loans are paid off, the removal of the oldest item from the credit report can cause credit scores to drop.

That last point is worth repeating: paying off your student loans can cause your credit score to drop.

Sherpa Tip: The damage to credit scores from eliminating a student loan is typically small and short-lived. It shouldn’t prevent people from paying off their loans.

The best way to mitigate this issue is to have a credit card. A credit card account can stay open indefinitely without costing the user any money.

An aged credit card account may make things easier when the time comes to buy a house.

Using a Credit Card Responsibly in College

Having a credit card account and using it responsibly are two very different things.

For most college students the best bet is to do the following:

  • Get a card without an annual fee. The purpose of the first credit card account is to build your credit profile. You don’t want to have to pay a yearly fee for the next 30 years.
  • Pay off the balance in full each month. If you pay the full statement balance each month, you won’t get charged any interest.

Going this route is more than just a great way to build your credit score. It helps people track their monthly spending and get into good financial habits.

Credit Cards and Irresponsible College Students

Not all students are great with money. Some will max out their first credit card, miss payments, run up a ton of interest, and damage their credit report.

I’d argue that it is ok when something like this happens.

The consequences of poor credit card decisions can be devastating, but they are minor compared to the dangers of student loan debt.

Credit card limits for most college students are relatively low. If things get really bad, bankruptcy is usually available for credit card debt. With student loans, borrowers can easily rack up six figures of debt. Bankruptcy rarely works out for student loan borrowers.

Simply put, credit card mistakes can cause months or years of regret while student loan mistakes can result in a lifetime of regret and struggle.

If you are someone who has to learn things the hard way, it is much better to make your mistakes with a credit card.

Credit Cards vs. Student Loans

Many people are justifiably fearful of credit cards, credit card companies, and credit card debt.

This same concern rarely gets applied to student loans.

However, when it comes to personal finance, student loans are the deep end of the pool. Whether you sink or swim with your money management, it is better to find out first with credit cards.

The rewards for credit card success in college are valuable, and the dangers from mistakes are dwarfed by student loans.

About the Author

Student loan expert Michael Lux is a licensed attorney and the founder of The Student Loan Sherpa. He has helped borrowers navigate life with student debt since 2013.

Insight from Michael has been featured in US News & World Report, Forbes, The Wall Street Journal, and numerous other online and print publications.

Michael is available for speaking engagements and to respond to press inquiries.

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