College Credit Cards

Dear Parent,

For many students, college is the first time they will be away from the rules and restrictions that came with living with their parents.  Many of them are forced, for the first time, to budget their money.  This is a great opportunity for parents to talk to their children about the privilege and responsibility that goes along with using a credit card.  Teaching students about responsible credit card use now can save them from having to dig themselves out of debt after they graduate. 

Many students may already have a credit card, but if they don’t, you can be sure that there will be plenty of opportunities to get one once they arrive on campus. Credit card companies solicit college students through a variety of methods, including direct mail marketing, the Internet, and tables set up on campus offering students “freebies”, such as T-shirts, water bottles, Frisbees, coffee mugs, etc. in exchange for having the student fill out an application.  Companies view students as future customers and are more than willing to extend them $1,000 or more in high-interest credit, under the premise that this is a good way for the student to build the good credit history needed after graduation.  Students can get a credit card regardless if they are supported financially solely by their parents. 

The college years are an important time to build the good credit history the student will need after graduation. The student will need to provide a credit report to apply for an apartment or finance a large purchase such as a car. Employers often review a credit report when they hire and evaluate employees for promotion, reassignment, or retention. Problems with credit cards, such as late or missed payments, stay in the student’s credit report for seven years.

The disadvantages of owning a credit card can outweigh the advantages, especially for students who have student loans and credit card debt to repay after.  Some students use their credit cards to pay for education-related expenses such as books and supplies.  Students who have not adequately planned for their financial future may be unable to handle payments for credit cards, student loans, and living expenses after college.  Imagine being 30 years old and still paying off a slice of pizza you bought when you were in college. Sounds crazy, but for plenty of students, problems with credit card debt can lead to that very situation.   That is why it's so important that parents speak to their children about money management.  The key is teaching students money management skills before they get a credit card.

In addition, it's better to finance college expenses with school loans instead of credit cards because school loan debt is ranked more approvingly by credit bureaus.

Until next month…enjoy your summer and best wishes!

Randy Stoltz, President