Should College Students Have Credit Cards?

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Crystal Nickson remembers when credit card companies used to come to college campuses and entice students to apply for credit cards in exchange for freebies like T-shirts. 

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Back in those days, Nickson said unlucky students who completed a credit card application and were approved for a credit card would most likely spend their freshman year racking up debt. They’d buy pizza, clothes and other nonessentials and lack understanding of how to pay this bill off.

Nickson, an accountant and CTP at Crystal Clear Tax and Accounting Consulting, LLC, said getting a credit card in college was the beginning of her bad credit story. She quickly found herself in debt up to her eyeballs. Looking back, Nickson said good credit and financial education would have made things a little easier for her.

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While students are unlikely to see credit card companies posting up on college campuses today, some may wonder whether they should have a credit card. Let’s explore the role the Credit CARD Act of 2009 has played in the drop of college students who have credit cards and other payment alternatives to credit cards.

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Why Many College Students Don’t Have Credit Cards

The reason why many college students don’t have credit cards doesn’t necessarily have to do with their personal decision not to obtain one or a parent who stepped in and said no. The drop is probably largely due to the Credit CARD Act of 2009.

The Credit Card Accountability Responsibility and Disclosure Act of 2009 (Credit CARD Act) is a federal statute passed by the United States Congress. Effective in 2010, the CARD Act barred issuers from extending credit to those under age 21 without having proven the ability to make payments on their own or having an adult cosigner. It also banned the use of gifts to entice students into applying for credit cards. 

While the CARD Act is responsible for many students, especially those under age 21, not getting credit cards, it has helped increase credit protections for students. Nickson said with these protections in place, college students are more likely to be better stewards of their finances.

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Payment Alternatives to Credit Cards

Those under age 21 who still need a payment method for college-related expenses may consider these alternatives in lieu of a credit card.

  • CashApp: This is a mobile payment service that does not allow users to spend more money than they have available. Nickson said students can send and receive funds instantly, and they can receive a customizable CashApp debit card.
  • Authorized User: This is where a parent adds a student to one of their credit cards as an authorized user. This is a win-win for students and parents. Students can access funds to buy necessities and parents can monitor their spending. Moreover, students can start building credit this way. Nickson said it almost immediately boosts their credit score and establishes credit history. Remember: the primary account holder must not make any late payments, default or close their account. Doing so will also reflect on the authorized user’s credit report and negatively affect their credit score.
  • Secured Credit Card: This is a card backed up by funds in a corresponding savings account, said Amy Maliga, a financial educator at Take Charge America. The credit limit on the card equals the available savings balance. If the cardholder is unable to pay, the payments are deducted from the savings account. Maliga said secured credit cards are a good way to wade into the credit pool without the possibility of drowning in unpayable debt.
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Credit Cards for College Students: Good or Bad Idea?

Nickson said it’s not necessarily a good or bad idea for college students to have a credit card in their own name. What they do need, however, is an understanding of basic personal finance and credit before they apply for anything.

Much of the decision also depends on the individual. Maliga said some college students are mature enough to use credit cards wisely, while others aren’t quite ready for this responsibility. Those who are unprepared run the risk of tanking their credit while they are in college. Doing so can make it difficult to meet post-grad milestones including finding a job, renting an apartment and purchasing a vehicle or home.

College students who do decide to obtain a credit card must take the following two actions to build a positive credit history: pay their bills on time every month and only use a portion of their total available credit. 

“These are the two factors that make the biggest impact on credit scores and what future potential creditors will review when deciding if they should extend additional credit,” Maliga said.

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About the Author

Heather Taylor is a senior finance writer for GOBankingRates. She is also the head writer and brand mascot enthusiast for PopIcon, Advertising Week’s blog dedicated to brand mascots. She has been published on HelloGiggles, Business Insider, The Story Exchange, Brit + Co, Thrive Global, and more media outlets. 

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