College Students Can’t Handle Credit Card, Really?

My article 10 Tips For College Bound Students, I wrote that college students should start using credit card while they are in college. This generated quite a bit of opposing comments. Specifically, I wrote:

Establish you credit history early. College is a great time to get your own credit card. This way you start your credit history early with those low spending limit student credit cards. However, be sure to learn the art of budgeting and do pay your credit cards off every month.

In the longer-term, it won’t make a huge difference. But students who can manage their credit accounts properly will be rewarded with a better credit score, a shinier credit history, and other rewards. I can understand the my readers’ concern, and I do agree that the primary focus should be studying. But there’s nothing wrong with learning important life lessons at the same time; especially about money management.

Aside what does it say about us as parents if we can’t teach our children to be responsible with credit card. I think that it’s better to let them make mistakes and learn how to manage credit card properly while the stake is small and we still have some influence over them.

On the flip side, I am well aware that there are adults who can’t handle credit card responsibly themselves, or have sworn off credit card forever for various reasons. For them, not letting their children use credit card is probably the right decision.

Agree or disagree?

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About the Author

By , on Oct 30, 2008
Pinyo
Pinyo is the owner of Moolanomy Personal Finance. He is a licensed Realtor specializing in residential homes in the Northern Virginia area. Over the past 20 years, Pinyo has enjoyed a diverse career as an investor, entrepreneur, business executive, educator, and financial literacy author.

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Leave Your Comment (23 Comments)

  1. mano says:

    College students can use the credit cards with the guidance of their parents,as this is the right age for them to learn about budget management.I hope that, it will make them more responsible.

  2. Altax says:

    Ya of course… They should know the value of the money before knowing the value of their expenses… If they are provided with the credit cards they dont know how to handle it (amateur). Means they have to earn and know the value of their money and then they could go on with their cards… Using a dad’s card in your college life for your own expenses is something kinda atrocious.

  3. geetha says:

    College students are educated enough. I think students are been trusted to make use of their credit cards in a proper way, if parents guide them properly.

  4. Aubrey says:

    This might sound hash, but if you can’t teach your kids how to use money responsibly, then you’ve failed (or they’re just really dumb). If they want to get a credit card, great. If they do well with it, then they’ll increase their credit (it does come in handy when trying to get a college apartment). If not, then they’ll crash and burn, and that’s their problem. That is, unless you co-sign and they wreck your credit. Bad call on your part.

    My parents didn’t baby me and try to shield me from the “big, bad world of creditors,” and I’m leaving college with loans completely paid off and a FICO score of 798. If your kids are too dumb to use a credit card responsibly, and think it’s just some magical thing that you swipe for free stuff, then they’re destined to fail in life anyway, regardless of whether or not you shun their use of a credit card.

  5. Pinyo says:

    @Eric — Thank you for sharing your perspective. I think it’s good to hear it from a college student.

    @Jeff — I think it would be very irresponsible for a credit card company to give away that type of credit limit to college students. When I was a student, my limit was only about $1,000. Perhaps, there should be a law that regulates how much credit card companies can offer in term of the limit.

    @G — Another good story.

    @Morgan — Great point about this being an attitude issue and not an age issue.

    @Eff — That’s my thought as well. I think early is the best time to make mistakes and learn from it.

    @Sara — You have great parents. Good example of how to start using credit card.

  6. Sara says:

    I’m thrilled that my parents taught me to use credit appropriately. I heard for years growing up that you shouldn’t charge anything you can’t pay off in full when the bill comes due. Then, when I got a card to start building credit, it was made very clear to me that my card was for books only. It was only to build credit, not to buy anything extra. Plus, it was easier to track book purchases, make returns, and not worry about being overdrafted with unpredictable book expenses.

    And you know what? My parents’ common sense, straightforward approach worked. I learned how to use credit appropriately and have a clean (and long) history that’s been a boon more than once.

  7. Eff Jay says:

    I think credit cards in college are a good idea. Of course, they’re not for everybody but because the limits are usually smaller, it’s relatively safe in my opinion (i.e.: the stakes are not as high). Still, it is a credit card and if it’s abused, a poor FICO score will result. The good news is that when you’re younger, you have those extra years to make up for mistakes and during that time, you can learn form your mistakes. As you get older, you need good credit for mortgages, loans, jobs, etc. and so there’s less room for mistakes. for these reasons, I would much rather see people learn about good credit management early in life so that they’re better prepared when they really need their credit.

  8. Morgan says:

    As a recent college graduate who got a credit card immediately upon entering university, I’m still confused as to why so many people seem convinced that young adults are not ready for a credit card. I have never carried a balance on my card for more than a month at a time. It is basic common sense to pay your credit card bill in full, and if you are unable to do so, to dedicate your time and effort to getting it paid off as soon as possible. I’m not sure this is really an age issue so much as an attitude towards debt. I don’t understand how some people are so comfortable with being in debt, but people of all age groups are guilty of this. Bottom line: use your credit card and pay it off, how hard is that?

  9. RB says:

    Most parents believe that giving their children credit cards helps them become a more of a responsible adult, but in actuality, it teaches students to be financially irresponsible.

    Along with paying back student loans, over 80 percent of graduating college seniors have credit card debt before they obtain a job.

    Young teens and college students are the number one targets of credit card companies and they have done an excellent job of making young adults believe that having a credit card is a rite of passage into adulthood.

    “I felt like I was an adult when I got my first credit card, but honestly it’s just for emergencies

  10. Jeff Rose says:

    @G

    I am on your side about a college student should being able use some common sense and take care of their use of credit cards. Your comment of “No college student is given a 10,000 or 20,000 credit card” is completely wrong. I know this because I was one of those college students back in the day (that was over 7 years ago). I don’t know what my credit score was then, but I was getting credit cards offers left and right and none of them were less than 1200.00.

    I actually just had an intern from the local university last semester who took a semester off to go backpacking in Europe (I got admit, I was a little jealous). But he has already racked up his credit cards up to $10k and has maxed out his student loans each semester. I asked him if he was worried. His response was, “Nah, it’s only $10k in credit card debt.” Only? Ouch.

    I commend you for having a level head on your shoulders. But I have also been witness to others that are not as blessed to have what seems to be plain old common sense.

  11. G says:

    Credit cards are not effin rocket science, if someone is in college, then he or she should have some effin sense in that head to figure out how to take care of a 300.00 credit card. No college student is given a 10,000.00 or a 20,000.00 credit card so dont say its easy to get in s—load of debt. Pay it off when you use it and problem solved, how easy is that???

    I am a college student, and have had a credit card since my 18th birthday. I dont make a lot of money from my part-time job but I make enough to pay the card off in full every month, or at least have the balance paid off within 2-3 months.

    I have 2 credit cards, one with 300.00 limit and one with 1200.00 and my credit score is 694 (checked this past february). So my point is credit cards are good; they are fine; they are not evil as a lot of people say; they wont hurt you; they wont make you drop out of school; they wont make you get in all this debt that everyone talks about – all you have to have is some common sense pay on time and in full if possible…and yes you will need some credit history when you graduate from college and start looking for jobs. (my current employer checked my credit report before i was hired)

  12. Jesse W. says:

    haha, I would have NEVER guessed that college students couldn’t handle credit cards!

  13. bluntmoney says:

    I am torn on this one. I don’t think there’s anything wrong with using credit responsibly, and would like to teach my son to do so, especially since things like car insurance are now affected by your credit score. On the other hand, I know first hand how easy it is to start out responsibly and with good intentions, and end up with debt.

  14. Jeff Rose says:

    Pinyo-

    Good topic that pulls from both sides. Let me first give personal example, then the example of a close friend.

    I was raised by a loving father that his one and only vice was credit cards. Unfortunately, I had acquired this habit going into college. I remember getting credit card offers left and right when I was a 22 year old in college. $10k here. $5k there. I remember getting an offer from Discover that I think was almost $20k. Why did I deserve this. A college kid working part-time at the mall? Fortunately, my career (financial advisor) and my spouse were able to nip it in the bud and I graduated college with no credit card debt or student loans (national guard paid for school). But at one time, I was almost $8k in credit card debt. Might not sound like a lot to some, but at 23 years old it made sick.

    Pinyo, you wrote “I think that it’s better to let them make mistakes and learn how to manage credit card properly while the stake is small and we still have some influence over them”. A friend of mine who received all the same credit card offers I did wasn’t so lucky. He opted to rack up his credit cards and max out his student loans each semester. By the time he was supposed to be a junior in college he was already $40,000 in debt. Worst of all, he failed out of school and was forced to file bankruptcy not to longer thereafter. With around 20% of 18-24 year olds filing for bankruptcy, there has to drawing line. Unfortunately credit cards companies don’t prevent you from crossing line from a “small mistake” to a disastrous one.

    I feel fortunate to have prevented my situation from escalating. Many other young adults are not as fortunate.

  15. Eric N. says:

    Pinyo,

    I may be in the overwhelming minority but I am in complete agreement with your advice. I think I speak for a different audience since I AM a college undergraduate, who’s fully knowledgeable about the drawbacks and, more important, advantages of credit cards.

    I typically don’t react this way, but I hate it when someone makes a blanket statement like, “College students should not use credit cards because of blah blah blah.” Yes, I understand the reasons but, let’s face it, college students are adults and they can and need to make their own decisions. Plonkee hits the nail on the head in that brief comment.

    My parents never had a talk with me about consumer credit but they provided an excellent example by paying in full, limiting accounts, and maximizing rewards. Now, I can honestly say that credit cards offer a level of convenience and rewards that benefit consumers (including college students) who use them well. I’m amazed that I have earned hundreds of dollars and free flights to pay for the things I normally would have to pay anyhow, WITHOUT having to pay a nickle in any type of finance charges.

    People who loathe consumer credit typically don’t trust themselves with the temptation, but for college students like me, who see all of the values of good credit cards (credit history, protection, rewards, etc), it would be ridiculous to pass up on the opportunity.

    Bottom line, college students can handle credit cards just as good as anyone. Don’t assume all of us are walking idiots with fast fingers.

  16. Jonathan says:

    establishing your credit history early is an excellent piece of advice. The younger people learn to manage credit the more likely they are to have a responsible attitude towards it when they are older

  17. Pinyo says:

    @Hayden — Good point. So we shouldn’t left the initial experience for our children in the hands of the credit card companies. It should be us, or someone more responsible than us, to do it.

    @ToughMoneyLove — Agree completely about your point. Now I ask, why aren’t we teaching our kids the basics of money management in high school? We teach them about sex, driving, etc. We give them gym classes and shop classes. Some even get advanced placement class. I am sure we can fit one money management class in there somewhere.

  18. Pinyo – I understand your point about different value systems. Unfortunately, too many college students learn their personal finance “values” from broke parents who are addicted to consumer credit and live paycheck to paycheck. I would hope that some of those parents would want to teach their kids by saying “don’t do what we did.” It’s the opposite with me. I would find it difficult to teach my sons about “responsible credit card use” when I find that most credit card use is “irresponsible.” If it wasn’t, there would be no credit card industry because they make their money on interest and fees arising from irresponsible use.

  19. Hayden Tompkins says:

    I think the problem with credit cards on campus is how they are presented.

    Here, sign up for this credit card and we’ll give you a hat. “Yeah, it’s hot and it’s Florida” says Joe College, “I could totally use a hat.”

    I am not saying that 18 year olds shouldn’t get credit cards, but it shouldn’t be so EASY and the equivalent of a bat-and-switch give away. Many of these kids were never eased into any kind of independence by their parents and, as such, make many many mistakes in their first years of college.

    Credit card discipline should either be established with the parents, or when the student decides they are ready. They had the credit card gestapo sitting outside the campus bookstore at my school which completely undermines the idea of sober, fiscally responsible and reasoned decision making.

  20. Pinyo says:

    @ToughMoneyLove — I don’t think there’s a right or wrong answer to this question. It seems that your family value dictate that any type of credit is bad, and I fully respect that. My value said that credit is a tool that we should learn to leverage properly.

    It’s a different value system, but I don’t think yours is wrong and mine is right.

    @theWild1 — “…you might be surprised how badly many college student are when it comes to managing money.” But that’s exactly the point, shouldn’t they, as young adult, should be able to manage their money by the time they are entering college? They are already in the process of making one of the biggest financial decision in their lives, and they still can’t manage basic finances? I think that’s a failure on both the parents and the society to let that happen.

    Regarding starting on the same spot, I have to disagree — it’s not only about credit score or the tiny cash back rewards. The biggest reward is financial acumen and experience. People who can manage their finances responsibly in college years will be far better than those who are never exposed to financial management, or manage their finances poorly.

    @Plonkee — Thank you. I agree that they should be able to manage their finances responsibility by that time. After all they are dealing with far more consequential things like drinking, driving, sex, etc.

  21. plonkee says:

    College students are over 18 right? Then they should be able to use a credit card responsibly just like every other adult should be able to use a credit card responsibly. Just like everyone should be able to drink responsibly.

  22. theWild1 says:

    As I am really fresh from my college experience, you might be surprised how badly many college student are when it comes to managing money. Some of the horror stories I hear can make your cringe, “What were they thinking?” Whether they be lazy or just not care that much, often time they get late on payments, which makes the whole process counter-intuitive.

    I personally think it is better for people to get credit cards only when they really need it. Meaning they actually have full responsibilities and payments to make. There are still various ways for students to build credit. I believe there are many recurring expense that count toward your credit.

    Whether you start building your credit early or wait till you really need it, you essentially will start out in the same spot. For the most part though, I think better results will come the later you have to get a credit card.

    Now that is not saying I oppose financially sound college students from getting a credit card, but we are talking about a big minority here.

  23. You are absolutely wrong. The list of skills that parents should teach their children is long, and how to use a credit card is not even on the list. In fact, I taught my three sons how to live without consumer credit at all. Two are graduated and one is in college. Only the oldest even owns a credit card and that is because he travels so much on business. All own their vehicles (paid cash), are 100% debt free, have a positive net worth with money in the bank and long term investments. The only “rewards” you refer to involve capitulating to the credit score and credit card industry which has brainwashed so many consumers.

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