If there is one stage in life that can either make you or break you, none seem as relevant as college. It is at this stage of life that many can either make or break their life. That is why many credit card companies target college students. If they can get them into the habit of using the plastic instead of the paper, most naturally it will follow them straight into their adult years, and as everyone knows, getting out of credit card debt, or any debt for that matter, can be next to impossible.
So why do college students get such “great” credit card offers? For one, even though they are high risk, most credit card companies have profiles on their parents, and many parents will bail out their kids should they default on their credit card payments.
In reality, many of the great deals many college students think they are getting are not great at all. Yes, Discover or some other card service might offer you a credit line of $2,000 to $5,000 but the half has not been told about the hidden fees, annual feels and what not.
The major problem with most credit cards geared towards college students is that the interest rate is extremely high. Whereas a regular credit card will generally have an interest rate between 3%-11%, once credit history is clean, the interest rate on a card for a college student can be up to 30%. Why is this? College students are high risk, not only that, but the student loans that many college students have can greatly weigh on their credit history. The more outstanding loans one has, the lower their credit score dives.
Annual fees are another reason why credit cards are a bad idea for college students. Many annual fees can run up to $60 a year and over. This is even if you use the card. Needless to say, that money can add up and when you tack on interest, you can see why paying minimum payments on a credit card will keep you in the whole for decades to come.
Another problem with starting the credit card crutch so early is that it sets one up for failure later on in life. Many adults have carried bad habits from their young adult years and that is why they are in financial problems at the moment. The idea of buying now and paying later is not a mindset one should get into so early in life. It is this mindset that has gotten even governments in trouble. The habits that are set in college will follow straight into adulthood.
Believe it or not, many employees are using credit history as a qualification for employment. Of course this can pose a problem to those who have less than perfect credit history. The last thing a fresh graduate wants is their employer to tell them is that they cannot get the job because their credit history is spotty.
Getting a credit card in college does have advantages however. If used correctly, a credit card can help build ones credit score. The whole mindset one has to take to use a credit card successfully is not to swipe it unless the money is in hand. Don’t bank on the gift mom or dad is sending, or the paycheck at the end of the week or month. Those variables could change. If the money is not in the bank or in hand, do not swipe the plastic.
So should a college student get a credit card? If they are responsible and hold themselves to their oath that they will not use it unless they have the money for the item in hand, then yes. If not, it’s not a good idea. Unfortunately our credit system is to keep people in debt and the last thing a student wants is to be in heavy credit card debt when the graduate from college.
