While your credit score might not seem important now, someday it’ll determine what apartment you can rent, what loans you can take out, and whether or not you can buy a house. Having a good credit score in our society can really make life easier, and it’s often a good idea to start early.

Good credit will help you:

• Lower your insurance rates.
• Obtain your first job.
• Purchase your first car.
• Purchase your first home.
• Rent your first apartment.
• Sign up for a cell phone plan.

These are all financial activities that you will want to partake in when you’re done pouring over books, writing research papers, and completing scores of problem sets. Every step you take in college helps you build your future, so why not think about credit too? Planning for your financial stability later in life isn’t geeky, it’s brilliant.

However, some people are of the mindset that college students are not ready for the responsibility of a credit card because they don’t understand how much damage simply making a late payment can do. This is not an easily dismissible concern. While credit cards can benefit a college student greatly, they can also cause serious financial harm to their future.

Therefore, before making the decision to open up a credit card, be sure that you know exactly what you’re entering into. Read the fine print. Shop around. Talk to your parents and your local banker, and whatever you do pay your credit card in full on time. While the minimum monthly fee may sound appealing, paying it can destroy your credit and your finances.

Here are some of the pros and cons of having a credit card in college…

 

What are the pros of a student credit card?

• Having a credit card will allow you to establish good credit early on in life. This will make it easier when you debate between buying or renting a home.
• There are many fantastic budgeting programs available to credit card users that allow you to separate your expenses into categories such as food, entertainment, and clothes. This can allow you to see where most of your money is going.
• If you find yourself in an emergency situation a credit card gives you flexibility when you don’t have cash available.
• Carrying cash is less necessary when you have a credit card, which may make you feel more secure.
• You can make secure purchases on the Internet with a credit card.

What are the cons of student credit cards?

• It’s easy to lose control, overspend, and end up paying off a credit card for years after graduation.
• If you don’t stay up on your payments your credit score will be negatively affected.
• Spending too much on a credit card means they have more to pay back and less money to save for the future. Savings are also a very important lesson for college students to learn.
• Be wary of high interest rates. Often credit card companies take advantage of college students by giving them small perks and then charging the highest allowable interest rates.
• There are often annual fees for credit cards. Most students don’t understand how a credit card works.

What about Student Loans, are they better than credit cards?

Student loans are another important option for college students. Student loans also allow a student to develop good credit once they start paying the balance off after graduation. The benefit of student loans verses a credit card is that student loans are a fixed amount of money and also have fixed interest which is always lower than a credit card. The fallback is that you don’t begin to establish a credit score until after you graduate.

Final thoughts on student credit cards and how do credit cards work…

Take a look at all of your options, read the fine print, and consult with an adult who you trust to guide you in making sound financial decisions. Getting a credit card in college is risky business, but can have its payoffs. Just make sure that you know what you’re getting into before you dive in head first.