College Students and Credit Cards

in college life by Kathy Teel — December 15, 2010 at 12:14 am | 0 comments

The Dangers of Easy Credit

Here we are at possibly the worst time of year for college students.  It’s finals.  It’s three months out from those financial aid checks and another month or more before next semester’s come in.  You’re broke, but you can’t take on extra work shifts because you have to study for finals.  And on top of that, you’re expected to have Christmas presents—maybe not for everyone, but definitely for the most important people (don’t try telling your girlfriend you’re too broke to buy her a present because of finals.  It will not go over well).

Into this cold, dark, impoverished time of year come…credit cards.  Credit cards are a dark pit of temptation for college students.  You’d think that it would be illegal for credit card companies to exploit students and their financial struggles—and actually, it used to be illegal.  But some pre-law student decided that was age discrimination, and that any adult, no matter what his or her age, should be allowed to get a credit card if he or she otherwise qualified (I just made up the part about it being a pre-law student).  Credit card companies then went the subprime route, meaning that they’d give students (who are notoriously poor financial risks) cards, but they’d charge them exorbitant fees and interest.   Students can’t pay exorbitant amounts of money, so the credit card companies would pile on fee after fee after fee, and college students graduate with their credit already badly damaged. They have made new laws regarding credit cards, but these don’t seem to be solving the problem.

I know the arguments for college students having credit cards.  They can start building their credit by getting a card with a low balance, using it only for emergencies, and paying it off every month.  And if they actually did that, it certainly would help them build their credit, and it might give them the security of having some emergency funds if something did go wrong.  But it never works like that.

The problem is that all students, whether they’re traditional or non-traditional, full-time or part-time, take a financial hit when they go to college, even if it’s the kind of college they only go to on their computer while keeping their full time job.  They can’t work extra hours, because they have to go to class and study.  Even if they get financial aid, it doesn’t cover everything and it doesn’t last.

A Downward Spiral of Debt

So, when does everyday life become an emergency?  Pretty darn fast.  If you’re barely getting by, and groceries are the first thing to go, eating becomes an emergency.  I remember when Phillips 66 gave me a credit card, and I fed myself and my boyfriend on convenience store food until we maxed out that card.  Not exactly healthy, but food is food.  You start out with good intentions—build credit, only for emergencies—but when you’re sinking, that credit card is a life preserver at first.  Then it’s a brick.

Some people say that credit card use is an inevitable part of college life—and statistics do show that even with the credit crunch of recent years, credit card use is rising among college students.  I don’t agree; after several years I learned the hard way, if you don’t have it, don’t spend it.  With the ubiquity of debit cards, there’s nothing you can’t do with money you already have, and when it’s gone, it’s gone.

But if you’re part of the “everyone needs at least one credit card” crowd, please be careful.  You could be digging a hole it will be very hard to climb out of, even when your degree is finished and you have that better-paying job you’ve been working toward.  At the very least, make sure you pay off more than the minimum, and make sure an emergency is really an emergency.

Tags: college students credit cards emergency pay