Credit Cards: Establishing Credit or Drowning in Debt?

The Debate

Should college students own credit cards? There is no simple answer to this question; it depends on the individual student, the student’s financial situation, and the student’s motivation.

One answer is yes, students should get credit cards in order to begin building credit. says, “Using credit wisely helps you build a strong credit history and secure loans and mortgages.”

Another answer is no, credit cards can rapidly become paths to debt. 81 percent of college students significantly underestimate the amount of time it takes to pay off a credit card balance, according to a Center for Economic and Entrepreneurial Literacy Survey.

St. Kate’s Money Management Program emphasizes that the motivation for obtaining a credit card is important: You should not use a credit card unless you can pay it off.

Peer Money Mentor Tiana Danforth said she has been nervous about owning a credit card, due to her worries about going into debt. The reason she does not have a credit card currently, Danforth said, is because she doesn’t need it; she doesn’t make purchases that require a credit card. However, Danforth is thinking about applying for a credit card because she wants to start building credit.

Building credit works for students because they can use credit cards to pay for things they already spend money on, such as textbooks, rent, and groceries. If students pay off their cards in full each month, they can strengthen their credit scores just by making everyday purchases.

A recent Bankrate survey indicated the current generation of college students is wary of credit cards and the debt they could rack up. The survey found that the millennial generation is less likely to completely pay off their balances and more likely to miss payments, compared with adults over 30. Many young people tend to prefer debit cards to credit, which can be problematic for establishing a good credit score.

The Money Management Program states, “Living within your means is essential to effective credit card management.”

Finding the Right Card

Students who decide to apply for a credit card should research types of benefits of credit cards first.

Purdue University supplies a list of tips for maintaining good credit, including developing a monthly budget, paying bills on time, and minimizing credit card debt.

Minnesota’s Attorney General suggests students read credit card contracts carefully and look for hidden terms and rate increases before applying for a credit card.

The Money Management Program at St. Kate’s tells students to look for credit cards with “no additional fee, a low interest rate, and a grace period of at least 25 days.”

Students planning on traveling or studying abroad should consider credit or debit cards that don’t have international transaction fees or currency conversion fees. Simply withdrawing money from an ATM while abroad can result in fees that add up over time with certain credit or debit cards.

Resources for Deciding On and Managing Credit Cards

The Money Management Program, located on the second floor of the Coeur de Catherine, has information about deciding if credit cards are right for you as well as the process of selecting credit cards. Peer Money Mentors are available in the Money Management office; these students also run programs for St. Kate’s students on different financial topics.

Recently, the Money Mentors hosted a program about credit cards; they are partnering with Access and Success to hold another program later in the year. This program will be geared toward student parents, but all students are welcome. The Money Management Program also has budgeting sheets students and soon-to-be graduates can use to avoid debt and track spending.

Making the choice: Credit or cash?

Students planning to apply for loans or rent an apartment after college may want to consider starting to build credit now. Those who worry about not being able to pay off their credit cards may need to think twice before applying for a credit card. Whatever a student’s financial situation, taking a closer look at personal finances and spending habits is always a good idea.

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