College Student Credit Cards

College students should be very careful about using credit cards. When used correctly, credit cards can help a college student establish and build credit. When used incorrectly, a credit card can ruin a college students credit score (or their parents) before they even graduate college.

How college students should use credit cards

College students who use credit cards responsibly will get all the benefits of establishing credit early and develop budgeting skills. Responsible students use credit cards only for items or bills they can afford such as books or bills and they pay off the balance every month. Students who pay off the balance every month are not charged interest and establish good credit. This becomes useful down the road when your credit score is reviewed when you are looking to buy a house, or even when applying for some jobs.

How college students should NOT use credit cards

College students should realize a credit card is not free money and it is not just an IOU. Students should not use credit cards to buy luxury items such as clothes, alcohol, or anything that they cannot currently afford. Some students claim: “I will be making a lot of money when I graduate and get a job, I will pay it off then…” This is the wrong mentality for credit cards. What if you have trouble finding a job after you graduate? (you still have to make the payments on the credit card) What if the first job you get has a low salary and you have trouble paying your bills?.

Not paying off credit cards every month also creates bad habits instead of establishing good budgeting skills. This is what they call “living beyond your means”. Adults do this all the time, instead of budgeting their money they spend all their salary and then look to credit cards when they run out of money. Later these adults have to pay all the same bills (just as before), but now they also have to pay a credit card bill which leaves less money for spending.

College Student Credit Card Interest Rates

Typically college students who don’t have established credit history get some of the highest interest rates. These interest rates could be over 18% which means if you dont pay off your balance in a year the items you bought are now approx. 20% more expensive. Can you imagine going to pay for an item and they rang it up with an additional 20% sales tax? So the shirt and jeans you couldn’t live without that was a great deal now costs $120 instead of $100. If you don’t pay off your balance the first year you will pay another 20% on that purchase the next year. This means high interest rates will be charged on money spent today that will cost much more tommorow.

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