Should My College Student Get a Credit Card?
Everyone in the United States can be divided up into three basic credit categories: excellent, or prime credit, no credit at all, and bad credit. If you have a teenager who is ready to leave the nest to try their own hand at life, they fall squarely into the no credit category. Having no credit rating is almost like having a bad credit rating: the offers you’ll get and the cards you’ll be eligible for aren’t going to be ideal, but you need them to help yourself climb up the ladder.
As a college student who is trying to establish their credit for the very first time, you basically have three options: get a card completely on your own, co-sign on a card with mom, dad or an older sibling with an established credit score or become an authorized user on mom or dads card. All three methods will help you build your own credit score, and all three choices have their plusses and their minuses.
First off, the choice that most college kids take is to apply for their own card. As an 18 year old, you are now legally allowed to enter into financially binding contracts, and that is essentially want a credit card is. If you are attending a major college or university, chances are (assuming the dean hasn’t cracked down on it yet) you are getting practically run over on your way to class by misplaced adults in bad suits shoving clipboards under your nose and reminding you that if you apply now, you’ll get a stuffed animal or a badly made t-shirt. Some schools have allowed card companies to solicit students, but only for the first week of class, which others allow it all semester. Regardless, the set up of applying for a card while you are trying to run to class doesn’t exactly encourage applicants to read through the offer they are signing. The card you would get will probably have a credit limit under 1,000 dollars, an interest rate at or above 20 percent and quite possibly an annual fee. If you are applying for a junior version of a rewards card, the chances for an annual fee double.
So, now you’ve got this card, what are you going to do with it. For a growing number of young people, the answer isn’t “use it responsibly.†You’re just forming your credit rating, it is exactly the wrong time to start abusing your credit. For some kids, the sudden spending power is just too much. If you don’t think you can handle it, try another option.
Co-signing on a credit card with a parent can get you a card with much more reasonable terms, and since you are getting mom and dad’s help, they will be able to monitor your spending and your paying habits. If things get rough, they can catch you in time and confiscate the card until you prove yourself worthy of the spending power that comes with every credit card.
A similar option is as an authorized user. In this case, mom and dad have even more power. If they feel you are abusing their card, they can cut you off completely with a simple call to the credit card company. All three methods will result in positive (or negative) feedback being sent to your credit bureau. Make sure it’s positive feedback, your future credit self will thank you.