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Credit Cards Can be a Friend or Foe to College Students

While parent’s mail boxes are filling with credit card bills from summer vacations and back-to-school shopping, their college-aged child is likely receiving offers for credit cards of their own. 

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Due to the Credit Card Accountability, Responsibility and Disclosure Act of 2009 (CARD Act), young adults under the age of 21 applying for credit now must demonstrate the ability to pay or have a co-signer in order to be approved. Thus, the 21-year-old college student has replaced the entering freshman as the likely target for credit card marketing.

 

The National Foundation of Credit Counseling’s 2013 Financial Literacy Survey found that 33 percent of respondents indicated they learned the most about personal finance at home. Although at first glance this can appear as positive, problems often arise if the parents have poor financial habits which the children observe and subsequently carry into their own financial lives.

Further, the survey revealed that only five percent attributed their personal finance knowledge to what they learned at school. This number is not surprising, as many states do not include a personal finance course as a requirement for graduation from high school. 

Stepping into the world of credit without adequate personal finance training is asking for trouble, as responsibly managing credit is critical to building a solid financial future. Apprisen recommends that young adults consider the following tips for successfully navigating credit:

  • Start slowly. Don’t apply for more credit than is needed. A little plastic can go a long way, particularly in the wallet of someone new to credit.
  • Don’t act like a kid in the credit candy store. It can be tempting to splurge on music downloads and late-night pizzas, but small purchases can add up quickly.  
  • Never, ever charge more than can be paid in full when the bill arrives. This is the cornerstone to successfully managing credit. Use this financial trick: Record each charge in the check register and deduct the amount from the balance just as though a check had been cashed. This method guarantees that the funds will be available when it’s time to pay the bill.
  • Choose the right card. New homework assignment: Research what’s behind the credit card offers. Fully understand the terms, interest rate, fees and credit limit, as these features will impact the final decision. Some student cards also offer rewards such as miles or points that can be redeemed, but read the fine print before signing on the dotted line.
  • Think long term. Negative marks on a credit file can follow a person for years. Evaluate charging decisions in light of tomorrow, not today.
  • Protect the card. Identity theft is rampant on campuses, and a credit card lying on a desk is as good as gold to a thief. Since studies show that identity theft is often committed by someone the victim knows, don’t be naively trusting. 
  • Don’t allow others to use the card, as regardless of who runs up the debt, payment remains the cardholder’s responsibility. 
  • If things get out of control, remember that businesses still accept cash, and a debit card can be used for payment in most locations. Don’t hesitate to put the credit card away if things get out of hand. 

The college student potentially has 50 years or more of credit life ahead of them, making it critical that sound financial habits are established at a young age. Credit can be a friend or a foe. That outcome is determined by whose hand is holding the plastic.

 

 

 

 


 

Apprisen, a nation wide nonprofit consumer credit counseling agency (CCCS), has been helping consumers with debt management for over 55 years. Our goal is to assist consumers who need to get and keep their finances on track with personal finance education, workshops, and services that include, debt management, debt counseling, credit help, bankruptcy education, and housing counseling. Call Apprisen at 800.355.2227 to find out how we can help you take control of your money.

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