<iframe src="//www.googletagmanager.com/ns.html?id=GTM-MKW3X7" height="0" width="0" style="display:none;visibility:hidden">
Credit Cards Explained
Advertiser Disclosure

Pros and Cons of Student Credit Cards

Updated:
Sean Bryant

Pros Cons Student Cards

After turning 18, many young people will immediately apply for their first credit card. It’s an exciting time, and the purchasing power can be a little daunting to some. Should you really take the risk with a student credit card?  Is it going to get you in over your head with debt that you won’t be able to get out from under?

Credit cards are a tool. When used properly they can have great benefits. When used improperly, the debt can last for decades. Here’s what you need to keep in mind when you decide to get your first card as a student.

The Perks of a Student Credit Card

Build Your Credit – Most young people don’t have auto and home loans on their radars. Those events seem far out in the future. Getting started building credit at age 18, however, gives you more years to build a solid credit foundation.

Great for Emergencies – We don’t always carry enough cash to take care of big expenses when they come up. Suppose you are traveling home and your car breaks down. A credit card can get you home without someone having to come get you.

No Need for Cash – Lost cash is simply gone. Not only that, but it is easily stolen, easily spent, and a bit inconvenient. With a credit card there is no need to carry more than a few dollars at a time.

Trackable Spending – For students who aren’t quite financially independent, or want to know more about where their money is going, credit cards are great because every purchase is tracked. Parents can log into the account from home to check up on their kids’ spending habits.

Learn How Credit Works – A student credit card can be set with a small spending limit (one that matches how much is in a separate savings account so there is less risk of going into debt). Keeping it small minimizes the risk of crippling debt.

The Pitfalls of a Student Credit Card

Accumulating Debt – The perk of cash is that you can see it being depleted. A credit card, on the other hand, doesn’t change. It can be tempting to eat out more often, buy unnecessary things, and end up accumulating debt that can take decades to recover from.

Not Understanding Interest Rates – Interest rates can be tough to figure out without examples of what they actually cost. With some cards charging around 20%, not paying them off on time can put a big ding in your wallet. For example, if you have $2,000 in debt at 20% interest, if you pay $40 per month you will be paying for nearly 5 years and spend $967 in interest charges.

May Lead to Bad Spending Habits – It’s easy to develop the habit of spending too much money. It’s hard to break that habit. After accumulating too much debt, you may have trouble cutting back on the spending in order to get yourself out of debt. Those bad habits that snuck in can take months to get them out.

Should You Get a Student Credit Card?

There is no one-size-fits-all for student credit cards but most people would be well served having one in their wallet if they can afford to pay it off each month. This way they will have a strong credit score when they actually need to get a loan for a house or car down the road. Here some credit card tips to build credit, but not get in trouble:

  • Have the card company set the limit at $1,000. This will limit how much debt you can get in.
  • Use the card once a month, like on one tank of gas. To build credit you have to use credit.
  • Pay off the card, in full, every month. There’s no sense in paying interest charges. Ever.
  • Only use the credit card in case of emergencies. Other than that tank of gas, it doesn’t get touched for anything else.

First published , last updated

Topics

ABOUT THE AUTHOR

Sean Bryant

Sean Bryant is a Denver-based freelance writer specializing in travel, credit cards and personal finance. With nearly 10 years of writing experience ,his work has appeared in many of the industries top publications. He holds a bachelor of arts degree in economics. He also runs OneSmartDollar.com. When not working, Sean enjoys spending time with his wife, daughter and dog Charlie and can frequently be found on his bike or snowboard.

Learn more about Sean Bryant

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author's alone, and have not been reviewed, approved or otherwise endorsed by any card issuer.

Credit Cards Explained may earn affiliate commissions from our partners on this page. These commissions do not affect how we select, rate, or review products. To find out more, read our complete terms of use.

You May Also Like