Should college students have credit cards?

Over the past few years there’s been a trend online of financial experts recommending credit cards for college students. Is this really a good idea?

This strain of advice usually includes some of the following arguments:

Why should college students have credit cards:

  • Having credit helps establish a good credit history.
  • Using credit early is educational and can teach the user how to manage debt.
  • Making purchases online is more secure with credit cards.

…And why they shouldn’t

We can see the wisdom in some of these arguments, but while they may be good reasons to use credit in general, we still say it’s a bad idea if you asked us should college students have credit cards.

  • College students should use credit cards for emergencies only. In practice, this is rarely the case. We say listen to our friend Paul Richard of the ICFE: “If you can eat it, drink it, or wear it, it’s not an emergency!”
  • Debt is the #1 problem facing college students and graduates these days, and they should not be adding to their debt burden with credit cards. Bad spending habits today can lead to long-term negative consequences. If you’re relying on student loans for any part of your college expenses, then avoid adding to your burden with credit cards.
  • Credit cards should be avoided unless the cardholder has steady income and can afford to pay the balance in full every month. College students lack the necessary income to remain balance-free, and tend to pay the minimum monthly payment. Unless you’re the rare college student who has the income to afford to pay off the credit card balance every month, you shouldn’t be using credit cards.
    • In fact, it’s so important that students have the income they need to repay their credit card debt that their use of credit is limited by law.
    • Under the Credit CARD Act of 2009, any student under 21 must get a parent to co-sign with them or demonstrate they have the income needed to repay credit card debt, or they won’t be able to sign up for credit at all. 
    • Getting a co-signer can be a good way to build credit for new consumers, but it’s risky, and mistakes young borrowers make can cause major problems for their co-signers. 

The best kind of credit cards for college students: 

If you’re determined to obtain and use credit because you want access to the advantages listed above, be very careful. Only get one credit card (it’s all you need to establish a credit history), and keep the balance paid off every month. 

Remember to keep the question “Why should college students have credit cards?” at the front of your mind. The only good answer is to build credit. That’s why our standard advice is to get a gas company credit card and use that to fill your tank—then you have regular purchases to build a credit history that won’t grow out of control.

Generally, there are some important features to look for in choosing the best kind of credit card for a college student:

  • No annual fees. You will want to keep your first credit card for a long time–potentially for life, even after you stop actively using it and move on to a better card. So don’t choose one with an annual fee that will make that card a burden later.
  • Credit reporting. Do some research and make sure the card reports to every credit bureau. The whole point of getting a credit card early is to build credit history, so avoid cards that don’t report to all three credit bureaus.
  • Fees. You won’t be able to avoid late fees, but do be careful about cards that only offer the minimum grace period and hit you with harsh late fees and penalty rates. 
  • Low balance. Students shouldn’t sign up for cards that let them get too deep into debt. Choose a card with a modest balance to limit how much trouble you can get into.

Ultimately, credit cards for college students are not going to be the primary cards you use, they’re there as starter cards for new credit users. We still think gas station cards make the most sense–they’ll be used regularly, but not for any major impulse purchases.

Speak to our certified Debt Coaches to review all of your options and discuss best strategies for getting out of debt.Speak to our certified Debt Coaches to review all of your options and discuss best strategies for getting out of debt.

About The Author

Melinda Opperman is an exceptional educator who lives and breathes the creation and implementation of innovative ways to motivate and educate community members and students about financial literacy. Melinda joined credit.org in 2003 and has over 19 years experience in the industry.