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You might be terrified of credit cards. Just another way to sink into thousands of dollars of debt! Well, they can actually be quite powerful financial tools in the hands of students. Click below to read the reasons you should get a credit card in college!
I know for a fact that some of you reading this are already disagreeing with me. So before I tell you all of the wonderful benefits of that little plastic card, I’ll add a small caveat:
The student should be mature enough to understand personal money management and the value of a dollar.
Alright, now that we have that cleared up, lets check out all the reasons you should get a credit card in college!
1. Building Credit
For better or for worse, the modern economy runs heavily on credit. Unless you’re extremely wealthy, you won’t be paying for a house or car (one that functions properly) with pure cash.
You’d take a loan.
Aside from your own student loans (if you have them), you won’t have many other avenues of building credit as a new adult.
Credit cards are an easy way to start building credit for doing things you’d be doing anyways. Rather than paying for your gas and groceries in cash, use that card! Just make sure to pay it off.
Speaking of that, I’d recommend using your credit card ONLY on fixed expenses (like gas and groceries) when you start out so that you have the greatest chance of paying your bill off.
If you start proving to the credit bureaus now that you are responsible with the money you borrow, it will pay off down the line when you more easily qualify for apartments, loans, and even jobs that require credit checks. It’s also easier when in college since you may have less expenses to balance. Just allocate your credit card to your fixed expense, pay them off, and watch that credit score climb!
Since I got two credit cards in college, I’ve managed to establish an Excellent credit score early in my credit history; I know that it will pay off in the future when I begin making large purchases.
2. That Sweet, Sweet Cash Back
One of my favorite aspects of credit cards is cash back. I have a Chase Freedom card that has unlimited 1% cash back on ANYTHING, as well as 5% cashback on rotating categories every 3 months. I also have a Chase Freedom Unlimited card that provides 1.5% unlimited cash back on everything.
Both of those credit cards are fantastic choices for first-time credit card applicants, but that’s besides the point.
While 1% or 5% may not seem like much, it really adds up. Currently, one of my Chase Freedom categories is grocery stores. Since I spend a good chunk of change every week at the grocery store, I use my Chase Freedom card and make plenty of cash back over the course of 3 months.
I’ve began to save up cash back and I’ve started cashing it out every year. It’s very satisfying to get at least $100 every year for doing nothing more than clicking the “Get Cash Back Now” button.
If you don’t want cold, hard cash, these cash back programs offer all sorts of rewards, from Amazon gift cards to travel.
You probably do want those dollar bills though, since you have books to pay for.
3. Money Management/Budgeting Skills
As you’ve probably guessed, I’m a big proponent of budgeting your money. Getting a credit card in college and learning to use it properly can help you develop some money management skills as a student.
Credit cards aren’t just limitless pieces of plastic; you have to pay the bill each billing cycle (typically every month).
In order to use your credit card properly without drowning in expensive credit card debt, you have to budget properly. Creating a budget to neatly lay out your fixed expenses will make it quite easy to determine how much you need each month to pay off your credit card bill.
If you manage your money properly and take advantage of my advice in #2, you will quite literally be receiving free money (or free discounts, however you want to frame it) for performing mundane adult tasks (budgeting, grocery shopping) that you would be doing anyways.
4. Emergencies/Accidents
Lets say that you have your car at school with you.
Now imagine that your car breaks down but you need it in order to get to your semi-lucrative part-time job.
Said part-time job pays you enough to afford the car repairs by yourself, but you aren’t paid until next Friday and you don’t have enough money in your bank account to comfortably pay for the car repairs.
Enter credit cards. Rather than needing the cash on hand immediately, you can just use your credit card to pay for the whole thing up front.
I’d recommend making note of a large card expense like a car repair so that you remember to pay it off as SOON as that bill hits your mail/email inbox.
(Don’t forget that even now you will get cash back on an emergency expense like this.)
5. Sign-Up Bonuses
Similar to what I said in #2, credit cards are potential sources of free money. To entice new customers, they offer signup bonuses, typically for spending a certain amount of money within a specific time frame.
Even for beginner-level cards, you can make great signup cash for doing nothing more than buying what you usually buy.
I’d recommend timing your application for a signup bonus card so that you receive it shortly before you will be making a large purchase (textbooks, school supplies). This way you get the things you need, you snag some good cash back, and you nab a signup bonus. It’s like free money!
6. Safety and Security
If someone else ends up with your debit card and decides they want to make some nice purchases, that money instantly vanishes from your account, making it hard to recoup your losses. Bank investigations into these things can take a while, so if you ever get your money back, you may be waiting a long time.
Since use of a credit card does not require instant withdrawal of cash from your bank account, you have ample time to notify the card company that you did not make the purchase so that they can solve the issue without you ever paying any money.
Cash may seem like the most secure option, but not always! If you have a large sum of cash on you and it is physically stolen, you are out of that cash.
With a credit card, you can call the company and cancel the card as soon as you feel as if it has been stolen or lost. Once you’ve done that, you can just get a new card from the company.
Give Credit Where Credit is Due
Yeah, credit cards can be dangerous if used improperly.
I believe that for this reason, it is all the more important for students to be introduced to credit cards in college while they are still in a learning atmosphere.
The earlier they make mistakes and learn from them, the better.
I’d recommend Chase Freedom (once again) because it is extremely easy to apply for and they have a $150 signup bonus after spending $500 within 3 months.
The easiest way to quickly hit $500 is to get the card when you purchase your textbooks and other recurring items.
Now that you know some reasons to get a credit card in college, start building that credit and earning those points!
“Great spenders are bad lenders.” -Benjamin Franklin