College Students and Credit Cards

When the average 18 year old goes away to college, he or she expects a number of things. Freedom, parties, classes, new people, new opportunities and new responsibilities. One thing they usually don't expect is how many offers will be thrown at them in the first few weeks of their life on campus. Sports teams will want them to join, clubs will want to farm new members, fraternities and sororities will offer companionship and fun, and credit card companies will want to give them all kinds of free stuff just for using their card.

Avoiding Financial Catastrophe

It's one of the least expected things first year college students have tossed at them, but it's one of the most important. A bad decision as a college freshman could lead to difficulties throughout life. The last thing they need to add to that student loan debt is credit card debt. Here are some ways first year students can avoid getting into financial difficulties.

The Hidden Interest

1. Don't fall for interest rate offers. Sure, you may get zero percent interest for 6 months, but what do you pay after that? Cards can get up over 25%! That kind of interest can build up very quickly, and before that first year of school is over, you could find yourself in piles of trouble.

Unrewarding Rewards

2. Don't fall for reward offers. While rewards for spending can be great, they're often not as simple as students assume. Frequently you've got to spend a substantial amount of money before rewards begin to accrue. On top of that, many companies require that you pay your balance in full every month. For a college student having their first experience with credit, this can be especially difficult.

Fees

3. Stay away from annual fees. Most of the time a student can find a card that will give them a good interest rate without an annual fee. There really isn't much reason to spend the extra money on an annual fee since it can be so easily avoided.

Too Many Cards

4. Don't get more than one card. Having the flexibility of multiple cards feels great in the moment, but the more you spend on each of those cards, the more you find your spending freedom squeezing in around you. There is an old adage in economics that goes "There's no such thing as a free lunch." This is especially true of credit cards. If you buy something with a card, you will eventually have to pay for it. And the longer it takes you to pay for it, the more it costs you. Running up debt on multiple cards is a sure way to ruin your credit before it's had a chance to get healthy. Ultimately, a college student will need money for expenses. It's a good idea to talk to your kids about the way credit cards work before they go off to school. You may even want to consider starting them off with a prepaid credit card or a debit card a couple years before they are ready for college. The sooner you help them develop good financial skills, the better prepared they will be to deal with the temptations and responsibilities credit cards carry with them.