Pros and cons of getting a credit card during college

Category: Credit

Beautiful afro american girl is smiling while buying book at the bookshop using a credit card


For many young adults, their college years often mean big changes, and it can give them their first true taste of living in the real world. As such, many college students opt for their first credit cards during this time. For those students who have yet to establish their credit, they may need to turn to their parents and have them issue a credit card for them. But is it a good time to actually open your first credit card? Or could it possibly be beneficial? Whether you’re a college student and thinking about applying for your first credit card, or you’re a parent and considering issuing a credit card to your college-bound kid, the following are some pros and cons to carefully consider first:

The potential to get into debt

As a college student, your financial resources may already be rather limited. With a credit card, you could be tempted to charge more than you can afford to pay back. If you’re already in debt from student loans, this can just make things worse for you. Unless you are just talking about a low-limit credit card that can’t do too much damage, some college students might want to avoid credit cards. However, this will vary by individual college student and their financial situation.

Build up credit sooner

The sooner you can establish credit history and begin building up your score, the better. By the time you graduate from college, your credit might be good enough to get an apartment on your own, and without a cosigner or substantial deposit. However, this would be dependent on responsible credit card use; falling behind on payments and getting into debt at a young age would have the opposite effect.

Being unfamiliar with credit cards

Most college students are unfamiliar with the way credit cards work. Things like APR and annual fees could easily go over their heads, and they might sign up for a credit card without fully understanding what they are getting into or the terms they are agreeing to. If you’re a college student and thinking about opening up a credit card, speak with someone (such as a family member) who is familiar with credit cards and can offer some advice.

Unnecessary spending

Even if you are able to make your minimum payments, having a credit card can sometimes make it easier for people to overspend. This can be especially true for younger adults who may not be able to handle the responsibility of a credit card just yet. If you are a parent and issuing your child a credit card before they go off to college—and if you’ll be taking care of the bill—you may want to establish some firm guidelines so that there isn’t any unnecessary spending.

Take care of other expenses

A credit card can be good for emergencies or unexpected (but necessary) purchases, and as a college student, you never know when something might come up. Maybe that textbook you need for your class that’s starting will cost a lot more than you expected, and you’re waiting for your next payday. Whatever the situation may be, you don’t want to find yourself in a tough spot financially. While it’s not a good idea to always depend on credit cards for everything, it can be comforting to know you have one with available credit—just in case.

Track spending

A credit card can be a great way to keep track of your spending. It’s essential for anyone to know where their money is going, but it can be especially important for a college student with limited financial resources, and who might be out on their own for the first time. If you are a parent and will be sending money to your child, issuing them a credit card—rather than sending cash or a check—can be a more efficient way to keep track of what they are doing with their money.

Online purchases

Credit cards can make it easier for college students to order things online, which can help save them money. From cheaper textbooks to dorm room necessities, the ability to shop online can give college students the opportunity to take advantage of any good online prices or promotions.

If your credit is on the line

Are you a parent researching credit card options for your college student? If so, you may have thought about cosigning for your kid’s first credit card, or adding him or her to one of your current accounts. Even if you’re positive that your child is responsible enough for a credit card, you are still putting your own credit and finances at risk. Your child may, in fact, use the credit card responsibly—but there is always the possibility that they don’t, and this is something to keep in mind.

Teaches real life lessons

Many college students don’t start paying bills until after they graduate and are out on their own, which can sometimes come as a shock. Having a credit card gives college students the opportunity to manage money responsibly and gives them an idea of what it’s like to pay bills. Sometimes, these lessons can be harsh ones, like the negative repercussions of missing a payment deadline. But college is a time for learning after all, and opening a low-limit credit card can be a good chance to learn these life lessons sooner, rather than later.

Do you have bills to catch up on and debt to pay off? If you’re receiving long-term payments from an annuity or structured settlement, Peachtree Financial Solutions may be able to help. At Peachtree, we purchase future payments from payment stream recipients who would prefer to receive their cash sooner. Imagine what you can do with a lump sum payment: you can make a large purchase, catch up on expenses, or possibly eliminate all of your debt once and for all. Contact Peachtree Financial Solutions today!

Nothing above is meant to provide financial, tax, or legal advice. You should meet with appropriate professionals for such services.

Tags: college, credit cards, online shopping, spending

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