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Credit card strategies for college students

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Here are a few things to know about college students and credit cards:

  • College students have access to credit cards. A 2016 study by Sallie Mae, a private student loan corporation, showed that 56 percent of college students had at least one credit card.
  • College students use credit cards. The same Sallie Mae study showed that 46 percent of college students use their credit cards for everyday purchases. Another 12 percent said they used them for all kinds of purchases.
  • College students have credit card debt. According to Sallie Mae, the annual average credit card balance of student cardholders in 2015 was $906. Younger students, age 18 to 20, carried a lower average balance of $611 than older students. Students age 21 to 22 carried an average balance of $1,013, while students age 23 to 24 had an average balance of $1,109.

The Sallie Mae report says the majority of college students handle their finances responsibly. But there is still a need to help students understand the effective use of credit cards. It starts with a basic understanding — that any form of credit means taking out a loan!

Students also need to understand the pros and cons of credit card use. The advantages include:

  • Convenience and ease of use.
  • Protection against fraud and theft.
  • Useful for building credit, if balances are paid on time.

The disadvantages include:

  • Ease of use may encourage impulse buying and overspending.
  • Limitations on cash flow of balance gets too high.
  • High interest rate and/or annual fee for some cards.

Advice from professionals

Most financial professionals suggest that college students carry no more than one credit card. Financial experts also recommend choosing a card with a low interest rate and no annual fee. Finally, experts tell students to apply for a credit card at their bank or credit union where they have a checking or savings account.

College students will do well with handling their credit card if they:

  • Use a credit card only when cash will be available to pay the balance.
  • Vow to pay the balance off each month to avoid interest charges on unpaid amounts.
  • Always use income or student aid to pay off school expenses first and credit cards only if necessary.
  • Keep track of all credit cards spending and save receipts to check accuracy of billing.
  • Pay everyday expenses with cash. Use a credit card only for emergencies or when a vendor requires that type of payment.

Making wise choices about credit cards is part of responsible budgeting. It's a habit that will insure a lifetime of financial well-being!

Shirley J. Anderson-Porisch, Extension educator emeritus in family resiliency (retired)

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