The case for having no credit in college

We've been talking a lot this week about college students and credit cards. Along with pizza, dorm rooms and late night study sessions, credit cards have become an almost mandatory part of the college experience. According to a Nellie Mae study, "Students double their average credit card debt - and triple the number of credit cards in their wallets - from the time they arrive on campus until graduation." Graduating students leave college with about $20,000 in student loans and credit card debt. Not a great way to start a career.

Parents, students and credit card issuers often cite the importance of establishing a credit history early and having access to emergency cash when supporting credit cards on campus. I think this is hogwash. The dangers of having a credit card as a student far outweigh the benefits. Here's why I think you should tell your teen to go without a credit card in college:

• The combination of no income and plenty of opportunity to spend can easily create a "debt vortex." You'd be amazed at how fast a few pizzas can add up to thousands in credit card debt.
• Managing your credit is hard work. You'll need to check your credit card balances regularly, pay your bills on time each month and check your credit reports 1-2 times a year.
• One screw up in college can easily damage your financial future for 7-10 years. All it takes is a 90-day late payment on a credit card for your credit score to drop dramatically and stay that way well after college.
• In turn, damaged credit can impact your ability to get a cell phone, car insurance, an auto loan, utilities such as electricity and gas, a job, an apartment or a mortgage in the future.
• Remember that "no credit" is often much better than "bad credit" from a lender's perspective.
• It isn't that hard to establish your credit after college. A student opening their first card after graduation and using it responsibly can have a credit score in the high 600's within just a few months. That score will qualify you for standard rates on most new credit.
• Each credit card you apply for (to get a t-shirt, gift card, 10% discount at the Gap, etc) will cause a ding in your credit score. Even if you close the account right away, a record will stay on your credit report for at least seven years. You should only open credit cards you intend to keep and use for a long time.
• There are other ways to deal with money emergencies. For example, parents can offer to put some emergency money into a savings account that can be accessed by an ATM card. Or it is usually easy for a parent to call in their credit card number to a hotel, mechanic or hospital if required.

I hope this list helps your college student "just say no" to credit cards! Did you have a credit card in college? Share your stories in the comments section below.

Comments

[Jim G]

Absolutely I had credit cards in college and built up a balance on them. With that said, my debt was not 'unnecessary' expenses like pizza and beer. I qualified for a limited amount of financial aid, partly because my parents made too much money even though I am paying for school, so I had to cover the difference those federal loans do not cover. Books, school supplies, personal items, living expenses, and things needed for college.

Positive side is I graduated a year ago and got a GOOD (Get Out Of Debt) job with that degree under my belt. I'm also glad I built up some credit history prior to graduating, or I wouldn't have been able to get a great rate on my mortgage to buy my house.

Someone who takes statistics and studies way too seriously and thinks young adults are idiots or 'irresponsible' to have a credit card because of mistakes some individuals in the past and the outlook debt situation of the future need to see the other side. There are two sides to spending and debt, necessary and unnecessary expenses.

Student loans can only pay for so much, and credit cards can help when used correctly. Please stop making young people fear using credit cards because not everyone has their parents to fall back on when it comes to paying for school.

[Emma]

Whoah...can you say spam?!!

I agree with you Emily. I don't think it's responsible to have credit cards while your in college. I also see Jim G's side. Still, I don't believe, and this is my opinion, that credit cards are necessary. Sure, you can use them to pay for college. There's also an option out there that works just as great, or even better because it doesn't create debt...a job. :)