The Advantages and Pitfalls of Student Credit Cards
Having a credit card is pretty much a necessity these days. After all, it seems hardly anyone pays with actual cash anymore and having some cash in plastic form is a comforting thought. Even so, credit cards do not come without their risks.
You can think of a credit card as like a loan. After all, you are able to purchase items on credit, without presenting cash of your own at the time of sale only to then pay off the purchases each month with interest attached. While credit cards may not be exactly like a loan, they are very similar. They just have really high interest, in comparison.
So let’s dive right in, shall we?
The Advantages of Credit Cards
Credit cards carry with them many advantages that extend beyond just benefiting college students. Here are just a few of the perks.
Protection
There’s nothing worse than laying down cash for a purchase only to get ripped off and have no way to get your money back. With a credit card, your purchases are logged and documented with the credit card company. Each purchase is detailed on your monthly statement. Should a problem arise, all you need to do is call up the credit card company and alert them to the issue at hand. Or, if suspicious activity were to occur with your funds, the credit card company may very well contact you to ensure recent purchases were in fact made by you.
Emergency Fund
You can only save so much money. Even if you save a lot and really plan ahead, you can still find yourself short one month because of unexpected expenses. What if your car breaks down? “Fine,” you say, because you’ve saved for just such an occurrence. But what if your pet suddenly becomes ill? They need to go to the vet, right? But with your emergency money just spent on your car, what can you do? You see, there’s where having a credit card really comes in handy. When you are strapped for cash and need to pay for something important, credit cards can make the previously impossible, possible. So long as you don’t consider buying a sweater on discount an emergency, you should be fine.
Convenient
Credit cards make paying for things incredibly easy. Instead of having to fumble with cash in your wallet, take time to count it and present it to the cashier in a rumpled, messy heap, a credit card makes for a smooth transaction. And, you don’t have to deal with change!
Can Use It Anywhere
While not all credit cards are accepted everywhere, the majority of them are, unless you go to a mom and pop shop out in the country. Then it’s probably going to be cash only. The point is though that credit cards are useful just about anywhere. If you need to reserve a hotel, you’ll need a credit card. If you want to shop online, you’ll need a credit card. Credit cards are everywhere and it’s important for you to be a part of it.
Why Having a Credit Card in College is So Important
Having a credit card in college is so important because it gets you on the right path for life. As a student, you will be concerned with a lot of things all at once, such as your grades, your social life and your finances. However, by having a credit card, you slowly build up credit. You don’t have to go crazy with it—just a few purchases here and there on credit can keep your credit report fresh. So long as you make payments on time, you should be fine.
This way, once you graduate from college, you’ll have a nice foundation of credit that can help you get future credit cards, auto loans, personal loans, an apartment, and one day, a mortgage.
The Pitfalls of Credit Cards
Even though credit cards carry with them many positives, they also have their share of negatives, especially for young people with not very much credit. Most of these pitfalls, however, can be dealt with by practicing responsible credit card use, which we will get to in just a bit.
Some examples of the negatives of credit cards include:
Finance Charge
Each month, you are sent your credit card statement, which details your purchases and shows how much you owe. You can pay the minimum amount due—typically just the interest—or the balance or some figure in between. However, when you go for more than one month without paying the full balance, it will accrue interest. This is called a finance charge and, depending on what card you have, it could be up to 20% of the balance.
Late Fees
As a college student, you may not be so used to having to pay bills each and every month. Because of this, it is more likely that you may forget to pay a bill one month. While this can happen to anyone at some point, you will most likely incur a late fee. Not only this, but being late on a payment can cause your interest rate to go up and your credit score to go down!
Temptation
Having a credit card is like having cash with you at all times. However, you can’t think this way, because your credit limit does not indicate how much money you have. It can be a serious temptation to want to spend because you “can.” It may be especially tempting for college students because they may not be used to having money on hand in this manner.
Your Guide To Responsible Credit Card Use
Now that you know the benefits and the disadvantages of having a credit card, let’s discuss some ways in which you can become a responsible credit card user.
Avoid Impulse Buying
One way to be a responsible credit card user is to avoid using your cards just because. Impulse shopping is the first and foremost way to rack up unneeded debt.
Use It For An Emergency
Saving your credit card for an emergency situation is one of the best things you can do. This way, you will always have a little bit of money on hand for those unexpected situations.
Don’t Spend More Than You Have
A good rule of thumb is to never spend more than you actually have. That is, don’t live outside your means. If you can’t afford an item without your credit card, then don’t buy it—unless it’s an emergency, of course.
Pay On Time Every Time
Finally, there’s no better way to become a responsible credit card user than to pay your bills on time each and every month. Getting into the habit of this will make bill paying easier for you in the future and help you build credit while in college—two very important things.