Should You Have a Credit Card in College?
There are many benefits to using a credit card in college, from everyday convenience to emergency peace of mind, and most importantly, the opportunity to build credit. You should consider getting a credit card in college if you are confident that you will use the card responsibly. If you think you may be using a credit card carelessly, it’s best to wait.
Benefits of getting a credit card in college
Understanding the pros and cons of owning a credit card in college can help you decide if it’s right for you.
#1 Create your credit history.
Getting a head start on building a positive credit history is one of the biggest benefits of getting a credit card in college.
Establishing a credit history is more beneficial than many people realize. This can open many doors for you, from getting approved more easily on credit cards, mortgages, and loans to getting lower interest rates on all lines of credit. Using a credit card is a great way to start building your credit history and credit score.
Since you are legally only allowed to have a credit card after age 18, your credit history and credit score will likely be lacking when you join college. Getting a credit card can give you this opportunity to build your credit history and build your credit score.
Before you rush to apply for a credit card, there are a few basics you need to know about using it to build your credit history. It is very important to establish a good credit history. Every time you make a full payment on time – both conditions must be met – your credit score improves by a few points. But, if you can’t pay the full amount or you miss a deadline, it will deduct a few points from your credit score. This record will remain in your history for 7 years.
Pro Tip: If your goal in getting a credit card in college is to build a credit history, you should commit to using it responsibly. If you are a compulsive shopper, it is best not to take it.
#2 Buy flexibility and everyday comfort.
Money can be tight when you’re in college and you might not have money available all the time, especially when you’re in between paychecks. You don’t have to wait until your next paycheck to buy the essentials. You can swipe your credit card and make purchases when you need them.
Pro Tip: If you overspend, you will end up with bad credit and credit card debt, both of which are devastating.
#3 Increased sense of security
From train and bus fare to getting a sandwich on the run or buying groceries or school supplies, you need money for purchases big and small throughout the day. Without a credit card, you have no choice but to carry cash all the time. But there is an element of risk in carrying large sums of cash on a person.
On the other hand, credit cards are safe. If your credit card is stolen, you can simply call the credit card helpline and ask them to freeze the card and issue you a new one. All fraud charges can also be appealed.
Pro Tip: Always consider how much money you have in your savings account and whether it will be enough to pay your credit card bill by the due date. You don’t want to spend more than you have in your account now or you will get into your account with your next paycheck.
#4 Peace of mind in an emergency
This is another great benefit of owning a credit card in college. You never know when and when an emergency might arise, knowing you have a credit card can be a huge relief.
Pro Tip: Every card has a credit limit. This is the maximum amount you can spend with the card. If you try to spend more than your card limit, your card will be declined. Ensure, at all times, that you do not exceed the maximum credit limit so that you can actually use it when an emergency situation arises. If you do, your credit card will not be useful in any emergency situation.
#5 Enjoy cardholder perks.
This is another great feature that comes with credit cards. After all, who does not love prizes and perks! Different cards offer different rewards. You can choose from cards that offer travel rewards with cash. Depending on the type of card you have, every time you swipe it, you get cash in the form of points or miles that can be redeemed.
The student credit card is designed for young people with no income or credit history and is a great option for college students. Admission to an accredited 4-year university is the only condition for approval.
Aside from the ease of approval, another advantage is that there are no annual fees, which is great when you have a tight budget as a student. The best part is that you get a variety of rewards or credit points for every dollar you spend using the card. And finally, it qualifies for discounts in many stores.
Pro Tip: A student credit card can be a powerful tool when you’re just starting out on your financial journey. Cashback and discounts can add value to every purchase. This can make all the difference when you’re on a tight budget. An added bonus would be a stronger credit score (when you use your card responsibly and make your payments in full by the due date).
#6 Get better student loan rates.
If you got a credit card during your first year of college and used it responsibly, then by the time you’re in your third or fourth year, you’ll have established some credit history. If you need to take out a private student loan in your third or fourth year or if you need a loan to finance a graduate degree, your credit score will help you get a lower interest rate. It can make a huge difference in the cost of a loan and the cost of your degree! Even a small reduction in interest rates can save you thousands of dollars in accrued interest over the life of the loan.
Pro Tip: Keep your credit usage low. Pay those bills in full each time to lower the interest rate on future student loans.
#7 Get better rates for your car loan and auto insurance.
This is the same with getting student loans. Since you have established your credit history and raised your credit score from zero, auto loan lenders will more easily approve your application and offer you a lower interest rate. Remember that it is important to use your credit card responsibly and to make all payments in full and on time.
Responsible use of your credit card can help you get better car insurance rates. Each insurance company has its own formula for setting car insurance rates. Regardless, if your payment history is flawless and your credit score improves, you’ll get a lower rate than others.
Pro Tip: A history of on-time payments is key to beating low loan and insurance rates and maximizing those savings.
#8. Makes it easy to rent or buy a house or apartment.
Not all landlords care about their credit history, but an increasing number are beginning to check the credit history of potential tenants. This is to ensure that you are a responsible tenant and likely to pay your rent on time. A good credit score and an impeccable credit history indicates that you are financially responsible and have the funds to pay off your debts on time.
Without a credit history, it is impossible for the owner to rate you as a customer. Many people prefer not to deal with the uncertainty and lack of rent for tenants who do not have a credit history.
If you are looking to buy, the solid result will get you approved for a mortgage more easily. Plus, you’ll pay lower insurance rates.