Credit cards

College students with credit cards can become dangerous. 

Many college students may relate to the overwhelming amount of unregistered credit cards that come flooding through the mailbox, claiming that their rewards are worth the activation. Yet, the most pressing question: is it really worth it?

Blogger Jeremy Vohwinkle for The Balance, a site that gives tips on money, business, loans and retirement planning, discusses why college students are so important to banks.

“Once someone turns 18 and can qualify for their own credit cards and loans, they become a prime target for lenders,” Vohwinkle said.

“Credit card companies know that young adults are eager to begin their adult lives, and this often happens when they go off to college,” Vohwinkle continued.

Dave Ramsey, leader of Financial Peace University, makes videos discussing financial responsibility. His advice is to stay away from credit cards as much as possible. Although banks may make it seem like a credit card is essential, this may not always be true.

It can be easy for college students to fall into the false sense of security that having a credit card means unlimited spending, something Ramsey often preaches about in his videos. Most companies may tell students that a credit card is essential to get through this stage in life and unfortunately, many people will believe them without knowing what they are getting themselves into.

Clearly, credit card companies know that money drives the average American, especially college students, as this generation is such an essential part of the U.S. economy.

Forbes referenced a study about those born from 1981 to 1997 done by Beth Ann Bovino, Standard & Poor’s United States chief economist. Forbes Contributor Laura Shin references Bovino’s report, stating that this generation numbers 80 million and spends an annual $600 billion.

“By 2020, they could account for $1.4 trillion in spending, or 30 percent of total retail sales,” Shin said.

Shin also expressed that this generation could be the largest in spending, if it was not for the enormous amounts of student debt and less access to full-time jobs that many college students face.

“What distinguishes millennials from other generations is the historic student loan debt that the generation carries. Which in turn, has meant that millennials, and some of Gen X, have had less access to full-time jobs and wealth than previous cohorts,” Shin said.

Most millennials go into an enormous amount of debt for their degrees and as many could attest to, college students love spending money on little things. Especially when classes start to get stressful, spending money can be a way to reward oneself for hard work.

While the upside is that a degree helps with finding a career, student debt introduces a whole new topic in the adult world: building credit.

“Credit” is not very complicated to understand either. Someone’s credit score basically serves as a measure of how efficiently the individual can pay back debt, as most loan systems require someone to make monthly payments.

The same is true for credit card payments, as the user is required to pay back what they spent each month, usually with some interest. This is how credit card companies make profit and it is easy to lose track of credit card purchases, which can plunge someone into too much debt quickly.

Now, students may be wondering: what is the point of a credit card? A debit card seems much less complicated and allows the user to pay with a set amount of cash, with no interest.

Creating and maintaining a good credit score is essential in regards to the adult purchases college students will soon have to make, such as buying a house or car. Loans will most likely be needed for the upgrades later in life and loans will not get approved with a bad credit score.

Bad credit scores usually happen when payments like rent, utilities, loans and credit card payments are not met on time.

Many students may be lost on where to even begin now that an overload of information on such a complicated topic has been shared. Something that could help is logging into Credit Karma, which can be accessed from a computer or their free app.

Most companies require a payment in order for someone to view their credit score, but Credit Karma is free and will show factors that are affecting one’s credit score most.

Getting a credit card in college can be beneficial if one is smart about spending. College students could stick to small and maintainable purchases, like gas and groceries and still build a decent amount of credit if they pay each monthly bill out of a checking or savings account. This will lead to a start in building a positive credit score.

College students will be thankful to be educated about credit cards when they need a loan for that new car or house down the road.

GARRETT KARSTEN is a features reporter reporter for The Vidette. He can be reached at gtkarst@ilstu.edu. Follow him on Twitter at @GKarstenISU


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