College and Credit Cards
Published September 12, 2013 | Updated September 15, 2013
Students starting or returning to college this fall are getting bombarded with more than homework. They’re also targeted by major credit card companies, which hope to turn your son or daughter into a long-term customer.
A recent survey by the Nellie Mae Corporation revealed that over 40 percent of college freshmen have a credit card. By the time they reach their final year of college, more than 90 percent have at least one credit card – and the average is four per student.
About 25 percent of college students reported using a credit card to help pay tuition. But the temptation for cash-strapped students may be to use their credit card to pay for items such as food, entertainment and clothes. When the bill comes due, many students may struggle to pay even the minimum balance – and before they know it, they’re strapped with growing amounts of debt. This can set them up for late or missed payments, lowering their credit scores and following them for years.
The answer isn’t to avoid using credit cards altogether, but to use them responsibly. Make sure your student understands that many employers obtain credit scores as part of the hiring process, and that a good credit score is necessary to rent an apartment once they graduate.
For those who have trouble managing credit, using a debit card is an alternative. That helps to ensure your student can’t spend more money than he or she actually has. Many parents set up accounts and deposit a set amount of funds on a regular basis.
If your student does get a credit card, pass along these hints to ensure that they’re managed correctly:
- Pay the bill on time. This improves your credit score and will save you thousands of dollars in interest over the course of your lifetime.
- Pay more than the minimum amount each month and if you can, pay the entire balance.
- Ignore credit card offers and only use one card.