Should College Students Have Credit Cards?

Cards can build credit history and skills for future success

A college student looks at her credit card and smartphone

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Just like learning to drive or moving away from home for the first time, getting your first credit card is an important rite of passage for young college students. Although young adults are already graduating with record amounts of student loan debt, learning how to use a credit card responsibly is a building block for accessing other types of credit later on.

Many undergrads put off testing the credit waters. According to the 2016 Experian College Graduate Survey, only 58% of college students had at least one credit card. Waiting until graduation or a steady, stable income materializes might be a smart move (particularly for those who aren’t mature enough to manage spending or monthly bill payments), but avoiding credit cards for too long can negatively impact adult financial plans.

If you are a college student or have a special college student in your life, find out why encouraging signing up for a credit card—along with a credit-education cram session—can be the best advice you provide.

Why College Students Should Get Credit Cards

there are several major reasons in favor of a college student obtaining a credit card. These can include building a positive credit history and having a convenient way to make payments.

A Jump on Building Credit History

Building a credit history with a college credit card is important, as credit card payments demonstrate an ability to manage a credit line. Four years of college will fly by, and after graduation, college students will need to rent an apartment and accept other financial responsibilities. Landlords, lenders, or creditors may decline a young person without any credit track record.

In fact, one of the main components of credit score is the length of credit history, which accounts for 15% of your FICO credit score (one of the popular consumer credit scoring models). The earlier a credit history starts, the more points you can accumulate for that score aspect.

Credit Cards Provide a Secure Payment Method

Whether college students purchase clothes online, book a trip, or pay for their streaming services, having a credit card is a convenient, and sometimes safer, payment method. If credit card information is stolen, a student probably won’t be responsible for any fraudulent purchases. But if their debit card is compromised, pending investigations could tie up a student’s bank account, and a student might face financial liability, depending on when the fraud was reported.

College Credit Cards Are Good Backup

Dorm-dwelling college students might not have easy access to cash all of the time—after all, Mom and Dad might be hundreds of miles away. A college credit card can serve as a safety net in case of a roadside emergency, a debit card being compromised or not working, or picking up a replacement graphing calculator from the campus bookstore.

Cards Earn Rewards and Cash Back

Many credit cards let cardholders earn rewards for their purchases—a great fit for cash-strapped college students. Maximize rewards cards by earning for the everyday, unavoidable expenses, and never spending beyond your means to earn points. College students booking flights to visit family on breaks might save on future fares with a travel rewards card. Locally based college students could stretch their budgets by redeeming points for cash or gift cards.

First Give Students a Crash Course in Credit 101

Years ago, college students were given tons of swag and freebies right on campus to encourage signing up for credit cards. But today, credit issuers and banks are no longer allowed to hand out credit lines like candy.

This means that even college students who do get credit cards can’t get into too much trouble since their credit lines will be only a few hundred dollars to start. That said, there are still a couple of key credit lessons all students must master before they apply for credit:

Make On-Time Payments

Timely payments are not only the number one factor affecting your credit score, but being 30 or more days late on your credit card will add a negative item on your credit report. That can potentially harm a cardholder's chances of qualifying for a future car loan, apartment, or other credit cards.

Show your college student how to set email and text notification reminders for the bill’s due date. Or create automatic payments so that at least the minimum amount owed will always be paid. Of course, the best way to avoid debt (especially if they’ll soon be facing student loan repayment) is paying more than the minimum balance due, and if possible, the entire balance in full each month.

Watch That Balance

Just paying on time isn’t enough to build a healthy credit score. College students need to learn that their debt load matters, too. Utilization, or the amount of available credit you are using, is the second most important component of your credit score. Ideally, credit users should try to stay under 30% utilization. So if you have a $1,000 credit limit, keep the balance below $300.

Credit Cards for College Students

Once a college student is ready to apply for a credit card, several options are available.

Card Comparison
Student credit card Student credit cards are designed for first-time or young users, with low credit lines, but sometimes have higher interest rates than a standard credit card. These cards may offer credit-education tools such as free credit scores. With responsible use, the student can “graduate” to a regular credit card with more-favorable interest rates and terms.
Secured credit card A secured credit card works just like a regular credit card in every way. However, your credit limit is matched by your contribution of a security deposit, which acts as collateral. If you don’t pay your bill, the card issuer can keep the money. So to have a $500 line of credit, you’ll deposit $500 into an account. Over time, with good, on-time payment behavior, you can move into an unsecured card.
Traditional credit card For college students older than 21 and with a higher income, it might be possible to qualify for a regular unsecured credit card. Again, it’s likely that credit limits will start off low, then build over time as card bills are paid in a timely manner.

The Bottom Line

Students shouldn’t hesitate to get a college credit card–but only after they’ve properly educated themselves about wise plastic management. Try using the card for small purchases at first, and aim to pay the card in full each month. By sticking to that game plan for the first couple of years, college students should see rising credit scores and increased credit access.