Credit Cards And College Students: A Bad Mix?

As many high school graduates prepare to enter a newer, bigger world, there are a lot of changes that will be made and learning that will be done. Besides academics, many college students will begin to learn from the school of hard knocks. Unfortunately, when it comes to credit scores and basic financial sense, there are many lessons that are still going untaught for far too long, leaving young adults riddled with credit card debt.

One of the chief debts college kids saddle themselves with besides student loans is credit card debt. Students who are not yet aware of the realities and importance of credit after graduation often see credit cards as ‘free money’, which is a recipe for disaster. While laws are quickly changing, in recent years college campuses were flooded with credit card kiosks and students were flooded with credit card offers almost daily. It’s no surprise that many students are still paying down college credit card debts long after graduation.

Credit cards and students usually don’t mix, but a little education can go a long way.

Here are some things every college student should know about credit cards:

Buy Now, Pay Dearly Later

Credit cards can be dangerous for college kids who may not have an income outside of their parents. It can be tempting to use plastic to fund late night pizza runs, clothing, or college party supplies. College students need to realize that while they don’t need cash for what they buy at that moment, they will need the cash plus interest at the end of each billing cycle. A pizza that cost $15.00 will end up costing them $18.00 with interest. When bills go unpaid, that pizza can wind up costing hundreds of dollars.

Bills Need To Get Paid No Matter What

The end of each billing cycle on a credit card requires at least a minimum payment to be made. Missed payments add up quickly and do not go away. Unpaid bills for 3 months or more can go to a collection agent and harassing calls and letters will follow. Students without parental permission or independent incomes need to reconsider credit card spending if there is no reasonable solution for paying off the balance each month.

Too Much Credit Ruins A Good Thing

While laws are changing to limit credit offers to young people, students in college can still secure a credit card. There are many temptations and supposed incentives being offered with every application that can lead to students applying for too many credit cards. Those applications can and will lower you credit score. Too many credit cards increases the likelihood of irresponsible spending in the eyes of many lenders.  Click here for more on where to go to get your credit report questions answered.

Everything In Moderation

For a college student living away from home, one credit card can be established as an emergency resource, provided student and parents have an agreement about the guidelines for use. For instance, a real emergency may be the need for school supplies and text books. Limitations for spending should be discuss and set before a student has access to the card. Parents who put their kids as authorized users on their own accounts can often set limits directly through the credit card company.

Education Is Key

Before a student has access to a credit card, parents or guardians should insist on a heart-to-heart about the credit card industry and basic personal finances. Students should be taught basic credit card terminology and what it means. Interest rates, minimum payments, billing cycle, and other parts of a credit card statement should be defined. Allowing the student to see that charges really do cost money may help them to understand the importance of controlled spending.