4 Reasons College Students Need a Credit Card

When used responsibly, a credit card while studying can really help you build your financial future. As long as you don’t charge a fee that you can’t afford to pay back – on time and in full – you can benefit a lot from using a credit card regularly.

Keep reading to understand why college students need a credit card if they want to start building a healthy financial life.

Build credit history and scores

It takes time to build your credit score. By getting a college credit card and using it responsibly for a few years, you can move on to the next stage of your life to get the best loan products and insurance rates. You can also rest easy knowing that your credit score won’t interfere with your future job or apartment search.

Having a strong credit history and credit score can come in handy in your financial, personal and work life. Many people focus on building their credit score in order to improve their loan and credit card offerings and secure lower interest rates; however, having a good credit history can affect more than just borrowing options.

Let’s take a look at how your credit score can affect different areas of your life so you can better understand the importance of working to improve your credit score.

• borrowing moneyA: Your credit score affects your eligibility, borrowing amounts, interest rates, and down payment requirements. The higher your credit score, the easier it is to get better deals on loan products.
• Work searchesA: Not every employer reviews job seekers’ credit reports to make sure they’re responsible and reliable, but that’s common for any job that requires money management. If you have a low credit score, this may give the employer a reason to choose another candidate.
• Flat rentA: Landlords would like to see a history of timely payments from potential tenants. If you’re competing for an apartment and you don’t have a credit history, the landlord will most likely choose another bidder who can demonstrate timely payment of bills.
• Applying for insuranceA: Insurance companies will also check your credit report to see how reliable and responsible you are – the lower your score, the higher your insurance rates are likely to be.

Learn Responsible Lending Habits

If a college student spends money recklessly, they may be in big financial trouble with a credit card. Before you take out a credit card, it’s important to understand the responsibility you’re taking on.

As a general rule, you should not use credit cards to make purchases that you cannot afford. Rather, you should plan to use your credit for regular essential purchases such as food and gas. Spending on your funds and paying off your credit card in full every month form good financial habits that will last you the rest of your life, as well as improve your credit score quickly.

“Financial planning is, for the most part, about being proactive, not reactive,” said Peter Palion, Certified Financial Planner and President of Master Plan Advisory. “If you show initiative early on, a student can graduate with a credit score above… 760 or 780 without much effort.”

An important credit card habit that students can learn from early learning is making payments on time, or better yet, paying off the credit card immediately after making a major purchase.

Treating a credit card like using cash or a debit card, making only those purchases that you can afford to pay for right away, is the first step to building a good credit routine. This will allow you to reap the benefits of credit cards (cardholder convenience and perks) without running into any of the downsides (delays and interest).

Credit cards offer valuable protection

Credit cards can cause serious damage if used incorrectly, but when used correctly, they can provide some pretty valuable protection to consumers. Not only are the online purchases that all college students make more secure when using a credit card instead of a debit card, credit cards usually come with a set of security offerings such as:

• Zero Liability for Fraud
• Encryption, chip-and-pin technology and fraud monitoring to keep personal information safe
• Purchase Guarantees
• Travel insurance policies

When you are first learning how to navigate life and finances, these defenses can serve as good insurance.

Have a backup in case of unforeseen situations

Without parents, there may come a point when a college student finds they need extra help. Whether you need basic services on a spring break trip, have an unexpected trip to the emergency room, or are having problems with your car, there may come a time when you need a lot more money than you have available. In an emergency, a credit card can really come to the rescue.

bottom line

Taking out a credit card is a big responsibility as a college student, but if you know what you can and can’t afford to charge, you can reap big rewards using one. Starting to form healthy financial habits—and your credit score—at a young age can help you be financially successful after college.