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Credit Cards and College Kids… *ahem*

by J. Money on Thursday, November 3, 2011

Friend Bank credit card

For whatever reason I’ve been doing a LOT of interviews/case studies/spilling of my ideas and thoughts to others, and every time I keep thinking – “Man!  This should be going on MY site too!” Haha… so, just like we did w/ the “how I became a full-time blogger” post, I figured I’d release my latest thoughts on credit cards and college kids too.

These questions come from my friend Miss Lissy, and part of it was previously published at her university’s paper: Wolfprint Online.  If you want more brevity and/or actual stats and what not, check her article out instead, haha… for example, did you know that the average balance for students is at a record amount of  $3,173 right now?? And that HALF of all undergrads have FOUR or more credit cards?  That’s like one for every year you’re actually legally allowed to have a credit card!  Crazy….  (She also interviews a student too – not just a crazy blogger like me, haha…)

Here we go… Hope my opinion dump helps you! :)

Do you think college students should worry about having a credit card? Or is it fine if they don’t have a credit card in college?

I think that’s a loaded question ;)  And one that’s hard to answer without knowing, specifically, WHO we’re talking about here. Some people are GREAT at managing, and even taking advantage of, the perks credit cards offer to all of us, and others should never EVER even touch plastic.  It all depends on how good (or not) you are at avoiding temptation and behaving yourselves (kinda like beer in college, haha… some can party like no other and still get straight A’s, and others just fail miserably when they get around the keg.)  But, “generally” speaking, I think getting your first credit card while in college can be a good thing.  It helps not only set up a credit report in your name to get you going later in life, BUT it also helps you learn to manage and deal with money in “real life” once you’re stepped away from mom and dad.  I got my very first one Freshman year (well, co-signed, anyways) and I was told very firmly that it was ONLY to be used for emergencies or when they specifically told me I could use it to buy books or whatever.  That def. ingrained smart credit card use over time, and ever since I’ve been pretty good at paying it off in full every month (I use credit cards to pay for EVERYTHING to get the rewards and budget easier, but I always make sure to pay it off before getting stung… though I’m def. no angel).

What is the danger of credit card debt?

Honestly?  The mental anguish and STRESS it puts on you!  Out of everyone I know *still* trying to pay off all their c/c debt, the one thing they all have in common is the frustration and anger of putting it off for so long and LETTING IT BUILD UP.  Having a hundred here or there is no big deal in the grand scheme of things, but you keep adding to it, and then pushing it off and saying you’ll “do it later when ___ happens” only makes it worse.  Mainly in your brain, and obviously in your pockets as well.  It really isn’t worth risking it, so if you don’t trust yourself to use it responsibly, walk away and just avoid it all together.  There are other ways to get money, like getting a JOB ;)

What are your top five credit card tips for college students? (Or you could look at it more broadly as they could relate to everyone, really)

Hmm.. probably a mixture of everything I just said:

  1. Only get a credit card if you *really* believe you can handle the responsibility of them.
  2. If you do apply, and get qualified for one (it might take your parents co-signing for you, which means that if you mess up THEY are held responsible), use it first for ONLY emergencies.  Which, hopefully, will be never.  But it’ll be safe to have and get you used to carrying one around (which you should do, in case that emergency we’re talking about occurs).
  3. Once you’re comfortable with ‘em, practice spending a little money here and there, and then paying it off RIGHT AWAY.  You don’t even have to wait until the bill comes – just log on to the card’s website and pay it right off.  This will help establish credit, and show that you can responsibly handle items you put on there every month.
  4. Always take 5 mins and scour your bill when it comes in every month — you will be AMAZED at the mistakes that can show up there every now and then.  I literally just found THREE, all in one bill, which would have costed me almost $200 in total!  For no reason whatsoever!! 5 hours later (I never said it was easy) I got most of them cleared up and now I’m just waiting for the third to finally be resolved.  But anyways, just proof that people/companies make mistakes and it’s usually up to YOU to catch ‘em.
  5. Did I mention only get a credit card if you can HANDLE IT?? ;)

Did you have a credit card in college? If so, what was the number one mistake you made with your credit card while in college?

Haha, I’m always one upping you here! ;)  Yes, I had a credit card and the one mistake I probably made actually happened when I tried to get ANOTHER credit card – just so I could get one of those stupid free shirts (remember when they used to have those offers?  Or maybe Congress has veto’d those practices by now?).  You used to be able to get a cool free t-shirt just by signing up to get a card, and all of us were stupid enough to fall for it and then get a nice card w/ yearly fees sent in the mail.  Which we all fought, and won, but we shouldn’t have gone for it to begin with.  (Which actually brings up another point — you don’t need a card that has yearly fees, find one that’s 100% free and only charges you when you leave balances on them!) Another mistake I made was putting chocolate bars and sodas on my “emergency card” after year two.  I was (again) stupid to think my parents would never find out and ended up getting an ear full when the bill hit my parents home (cuz remember, they had co-signed for it so they saw everything I did).  Not a smart move. I highly recommend playing by the rules ;)

If someone thinks they are going to be tempted to overspend but wants to have a better credit card, should they still go for the credit card? Or is it okay if they wait until they think they could handle it better?

I would say that if you’re already tempted to spend more than you’re making (thus, the reason for needing a credit card), you should hurry up and pay it off and then CUT IT UP.  The main reason people use ‘em when it comes down to it is because they want money they DON’T HAVE.

Yes, it’s true that you first start out just “floating” yourself the money because you know you’re gonna get paid in 2 or 3 weeks or whatever, but over time you start getting comfortable with this make believe budget you have in your head, and before you know it you’re leaving more and more money on your card and never wanting to pay it off.  And I don’t blame you – it’s annoying!  Who want’s to give all their money away to a bill?  (answer: no one) But somehow, some way, 80% of people (i don’t know what the real % is, I just made that up) find themselves owing more money than they have and wanting to place the blame somewhere else.  Well I’ve got news for you – it’s YOUR fault, and only YOU can get yourself out of it. And one way to do that is to catch yourself before you reach that point and cut yourself off.  It’s never fun, and it’s never what all your friends are doing (believe me, everyone and their mom has some sort of credit card debt), but if you want to have fiscally responsible life, NOT getting into c/c debt is the best way to get there.

And deep down no one else wants to be the way they are either!
  It’s just no one wants to talk about it and they all think it’s OK because it’s the new “norm.”  Well don’t let it beat you out.  If you don’t trust yourself enough to pay the bills off in full each month, or to pay attention at ALL to them in general, don’t start.  The world worked fine for years without credit cards, and surely you’d be fine without them too.  The #1 rule to ALWAYS being financially secure is this:  Never spend more than you earn.  That’s it.  Simple as $hit, but no one ever wants to follow it.  If you wanna live the good life and achieve financial freedom one day (and that can mean all kinds of things to all kinds of people), just follow that one rule and you’ll be totally fine.  I’m not gonna say it’s easy, and that you’ll always wanna do it, but if you can muster up the courage and stick to your guns for as long as you can, you’ll reach that success before you know it.  And THEN you can waste all the money you want :)  Because then YOU’RE the one in control, not your debt. And that’s one hell of an awesome place to be, my friend.

Questions? Comments? Concerns? Holler at me ;)

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PS: You can check out some of the best “student” credit cards here if you’re looking: best student credit cards (scroll to bottom)

(Photo by cory schmitz)

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{ 20 comments… read them below or add one }

1 Ms.S November 3, 2011 at 8:32 am

I had 2 credit cards in college. Got them to ‘build credit’. I was always tight with my money so I used them responsibly. I also kept the credit limit low. That would be my tip if a responsible student got a cc. Keep the credit limit low and let the credit card company know that. Every time they raise the limit, contact them and tell them to put it right back and lock it there. You may have to do it a few times but after a while, they get it. I still have one of the cards I opened in college and the credit limit is still at $450. It’s the only card I have as I closed the other one shortly after college after I realized I didn’t need both.

But in general I would suggest that college students do not get cc’s unless absolutely necessary. They can use their check/debit card for the carrying a card lesson. Or get a prepaid cc where you only have access the money you put on the card.

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2 Diane November 3, 2011 at 8:44 am

I didn’t have them, and I don’t think it’s a good idea to have them in college. This country as a whole isn’t very responsible with credit cards, and expecting new users – many without jobs – to use them responsibly is a stretch.

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3 J. Money November 3, 2011 at 9:49 am

@Ms.S – That’ll do the trick too ;) Though, strictly “building credit” speaking, you’d actually WANT a high credit limit so your debt-to-credit ratio is pretty good. For example, if you owed $250 on a card w/ a limit of $500, your ratio is at 50%. If you owe that same $250 on a card w/ a $5,000 limit – even though it’s the SAME amount you owe – you actually LOOK much better cuz now your ratio is only at 5%. But all that only matters if you are responsible and won’t spend more just cuz you have access to more ;) So your plan of keeping it low in college is SMART. Thanks for sharing!
@Diane – Haha… yeah, the odds are certainly not in their favor, but I gotta keep the faith deep down ;) The majority of people get a credit card at *some* point.

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4 Trinnie November 3, 2011 at 9:56 am

I was so so stupid and got a couple credit cards in college. The first credit card was to pay tuition, since I had to cover that on my own and because my parents made too much money and still claimed me on taxes, I couldn’t qualify for student loans. Once I saw how “easy” it was to spend money w/the credit card, boom, I got the second! (With the free t-shirt included!) Luckily I only had small limits on both of them, but still racked up that balance. took me like 5 years to pay off like $1000 credit card balance.

Everytime I think about it, I wish 32 yr old Trinnie could go back and yell at 18 yr old Trinnie not to make that decision.

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5 Stephanie November 3, 2011 at 10:07 am

Yeah, I’m of the high-limit, low-utilization school of thought when it comes to credit cards. And it’s nice having the high limit if I want to get a lot of points for a big purchase. That’s actually what I did when my husband and I moved into our house – all the work we wanted to do went on the credit card even though we had the cash to pay it right away, just because we wanted the rewards points!

And I got my first credit card my senior year of high school, as soon as I turned 18. I wanted to start building credit right away, so I’d make one or two small purchases each month and pay it off in full. Once in a great while I’ll carry a small balance from one month to the next as a strategic move (suck it up and pay a couple of dollars interest so I don’t have to dip into my savings account, or most recently I took advantage of a 0% interest deal on my new laptop – paying it off in 11 months instead of 18 though!), but I’ve never carried large amounts or for an extended period of time for the exact reason J$ gave- I couldn’t deal with the stress. If I don’t have the cash available to cover something in full and it’s not an absolute necessity, I don’t buy it.

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6 Liz November 3, 2011 at 10:10 am

I worked my way up to a credit card ($1500 limit) my senior year of college. ATM card first year, debit card 2nd (didn’t know about debit feature 1st year), upgraded to check & cash card 3rd year. So by the time I got a CC, I was used to not spending more than I had in the bank to pay it with. Kept that $1500 balance through grad school and only called USAA to increase the limit after starting a full time job.

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7 Liz November 3, 2011 at 10:19 am

$1500 limit I mean, only carried a balance when paying tuition bill for last spring semester of grad school

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8 Daisy November 3, 2011 at 10:32 am

Well, I’m in college, but I’m not sure I’d classify myself as a college kid, persay. I’ve been in college for 5 years and have had a credit card for 4 of them. The first year, my credit card had a rough go. I was irresponsible and up to my ears in debt, since they kept upping my limit. Luckily, I’m a fast learner. A year ago I started my blog, but 3 years ago I decided to use it for everything and then pay it back right away – I love free money and mines a rebate card.

I think there are a lot of responsible college students out there, and it’s hard to say whether or not all of them should have cards or not. I wouldn’t have been able to pay my way through college if I didn’t have one. I have paid for my whole education alone, and that 20 day period between which I could charge money onto my card and not have to pay it really, really saved me.

I can see where it’s dangerous, though, especially to young college students right out of highschool.

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9 SmartAssetTeam November 3, 2011 at 10:49 am

I think you have compiled a lot of useful information here concerning the risks of credit cards, and this is certainly applicable to many more people than just students. I just wanted to emphasize a few points you made that I think should really be driven home.

1. It is a great idea to start early with a credit card and CO SIGN with your parents so that they can coach you and help you build good habits early. I think this makes perfect sense for anyone getting started with a credit card.

2. Only sign up for a card without yearly fees. That’s all that needs be said here.

Something you didn’t mention, but that I think could be really helpful for first time card users: You probably won’t qualify for a card with a huge credit limit, but make sure just in case that your credit limit starting out is small, just to minimize risks. My first credit card had a limit of $1,000, and I think it was good to not be tempted by a huge number.

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10 Edward Antrobus November 3, 2011 at 11:42 am

I had a Who’s Who Among American High School Students card that I got when I graduated high school. Over all, I was pretty good with it. A few purchases I regret, but I’m not sure I could blame them on being young. Where the trouble came was when I decided to live off it while taking the summer off. Now that was a dumb idea. Still paying that indiscretion off.

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11 Jenna, Adaptu Community Manager November 3, 2011 at 12:46 pm

It also depends on WHERE you go to college. I went to school all the way across the country so I had to get a credit card. No way I could afford to buy an emergency last minute plane ticket across the country without one. Luckily, I never had too, but having a little bit of peace knowing I could was worth it.

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12 Rachael November 3, 2011 at 1:43 pm

I can’t remember exactly when I got my first credit card. Probably around my second year in college. It was through my bank, my parents did not cosign with me. I just used the card sporadically and always paid it off in every month. I do remember having a conversation with a girl who lived in my hall about credit cards when I was a freshmen. She was doing something for a class and asking people if they had credit cards, how much they used them etc. and she was suprised to learn that I did not have one and once I had one I didn’t plan on using it that much. Probably my biggest credit card mistake is falling for the store card trap during my senior year of college.

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13 Camille November 3, 2011 at 2:04 pm

Well-timed post, J$. I’ve been struggling over whether I want to encourage my college sister to get a credit card, and if I should co-sign with her. My mom did that with me the day I turned 18, but she says my sister is irresponsible with her debit card fees so she won’t do it with her.

Yet, I feel like if I don’t sign my sister up for a card, I’m doing her an injustice. If we don’t get her credit history started asap, she could have problems getting loans when she’s graduated and responsible.

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14 Amanda Bee November 3, 2011 at 4:09 pm

I got a card my sophomore year of college, at the ripe age of 19 by myself. It was one of the best things I did.

Neither of my parents are financially responsible people, and I can’t rely on them for any kind of financial advice or help. I was super wary of cards because I didn’t want to have debt like theirs (that sounds snooty, but it’s not- I feel for them, I just don’t want huge CC bills like them). I bought the card to build credit, and used it ONLY for gas at first. Which worked well, so I started using it for other things. But the rule was that I had to pay it off online within a few days of charging it, so it never built up and I never paid interest.

I haven’t had flawless card usage since then (who does?) and ended up putting a couple of emergencies on there when I probably could have managed it out of my bank account. But I’ve paid maybe $5 in interest in the past 3 years total? So I feel like that’s a success.

And now at 22 my credit is good enough that I don’t have to scrounge for cosigners in the event that I ever need a loan, or have to pass a credit check for an apartment (which is common around here). And that’s awesome, because finding a cosigner when neither of your parents can do it is no fun.

So I guess I agree with most of what you say- if you’re trustworthy with a card, it can have huge benefits. But you have to be honest with yourself, and look at your past history to determine if you’re REALLY trustworthy. Do you have a history of overdrawing your account? Don’t sign up for a card until you have that sorted.

Side note: I hate the advice that you should stick to as low of a limit as possible. High limits are helpful, credit-wise. The only reason they hurt is if you tend to load up the debt. But if you do that then you shouldn’t be getting a CC in the first place, in my opinion.

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15 Dannielle@Odd Cents November 3, 2011 at 6:46 pm

I got my first credit card at 23 and that was only because someone offered me a pre-approved card. I would never forget it. I got that card a couple days before I was going on vacation in Toronto. That was the first time I ever went on a shopping spree and I went crazy on clothes. When I got back home, the bill nearly gave me a heart attack. Back then I never used to pay off the balance in one go, I would stretch it over a few months so that I could continue to save. But since then, my habits have changed – I keep a note of what I credited and I pay it off in one go. A credit card is a lot of responsibility and you have to be disciplined and keep your financial limits in mind.

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16 Brad Moore November 3, 2011 at 8:46 pm

First, and unrelated to your questions, cutting up a credit card is the way to go. I was going to put a video on my website about how to bake a credit card……but it really began smelling bad and I goggled and found the fumes are poisonous. So cut ‘em.

The main reason I have had CC’s in the past was for the rewards. However, our current bank (Whitney) also gives us rewards for spending on the debt card. I figure that’s the best of both worlds!!

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17 Diane November 4, 2011 at 9:11 am

@Camille: Do NOT co-sign for your sister. If you do you are almost certain to trash your own credit and regret that move. Your Mom has good reason not to sign for her – take her lead.

This mania with getting credit right away so as to “develop” a credit score is dangerous. If your sister develops good financial habits and saves money she will be fine, and have no issues in future. Far more fine than developing a debt habit.

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18 J. Money November 8, 2011 at 7:27 pm

@Trinnie – Awww, well at least you got capped at $1,000! That’s way better than most others out there – so good job ;)
@Stephanie – You’re a smart chick, my friend. I love grabbing those rewards even though you have the cash too — it’s free money!
@Liz – Nice! I always forget about debit cards… I used to use them a lot too, on top of my credit card in school so I wouldn’t get in trouble w/ the parents ;) Though, it also ran out a lot faster, haha…
@Daisy – Yup! Some in college can for sure handle it, all depends on who we’re talking about :) Congrats on learning so fast!
@SmartAssetTeam – True that. I think mine was only $300 or $500? Can’t remember – been a few years ;) You’re right in that it’s good for EVERYONE to keep in mind though! Especially those who skip college altogether and go right into the “real world”… though, I suppose they’d have more money and not *need* cards as much? That would be an interesting research project :)
@Edward Antrobus – A “Who’s Who” card? Never heard of… did it give you special deals or something? Sorry you’re still paying it off, that sucks :(
@Jenna, Adaptu Community Manager – YES! True. The farther you attend college away from home, the more you’ll probably feel safer WITH a credit card. Good point.
@Rachael – Well, you can’t be perfect ;)
@Camille – Yikes, that’s a tricky one! I think someone commented back at you below (“Diane”), but I think I’d have to agree and veer to the “no” to co-signing too. Though I don’t know your sister, or your mom, or you for that matter, haha… the idea of mixing money w/ family/friends when they’re irresponsible is def. cause for trouble. Maybe she could get a prepaid card or something instead to learn from? Wouldn’t help out w/ credit score, but better to have none and a BAD one in my books… I’m pretty sure she’ll figure out a way to get one anyways, most poeple do ;) Wishing you both luck!
@Amanda Bee – AGREED! I’m all about having higher credit limits than not if you can hold back the temptation. Also in that it sucks to find a co-signer for apartments ;) I had to do that when I got a place in NYC (Parents didn’t trust me all the way I guess then? Haha…) and it turned into a pretty sticky situation (Was our roomate’s boyfriend who then “expected” stuff in return if you know what I’m saying.) Hopefully we never have to do that again ;)
@Dannielle@Odd Cents – Haha, man they got you RIGHT in time! :)
@Brad Moore – Well, it still sucks if your debt card gets stolen and they drain your account of cash, but other than that yeah – kinda the same if you’re still getting the rewards. (though actually, you wouldn’t be able to use them for large emergencies either unless you have tons of cash? So I change my vote – they’re not the same, haha…) As for your baking though, that is AWESOME!!! You should check out my friend Danielle’s destroying debt video ;) She did a viking burial with ‘em! Haha…
@Diane – Good response :)

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19 Paula @ Afford Anything November 13, 2011 at 1:33 pm

I got a CC in college and never had an issue — my discomfort with spending money happens at the register. I dislike spending money (and/or rejoice in the great deal) at the moment of the “point of sale,” as its called in retail lingo.

That doesn’t change regardless of the medium of payment that I use.

But I hear stories of other people who have problems, including one friend’s boyfriend who refers to his CC as “free money.” So the answers certainly aren’t one-size-fits-all.

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20 J. Money November 13, 2011 at 11:18 pm

Hah! I call it “free money” too, but only to be funny… if I believed in that I’d be in a Loooooot of trouble! ;)

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