Credit cards and the college student

Credit cards in a jean pocket

You may be wondering if it’s wise for your teen to have a credit card while in college. The fact is, their first card sets the foundation for them to establish a long and healthy credit history. This is an important first step in teaching your teen how to manage their finances. The question is, what kind of story will their early credit history tell?

If you have a college student who’s at least 18 years old and wants to have their own credit card in college, here are some tips on how they can use the card responsibly to build a positive credit history.

Make responsible spending decisions 

  • Don’t use the credit card for impulse purchases. This is one way credit balances pile up.
  • Only charge what they can afford to pay back in full when the monthly statement arrives. Even if this goal is not met, they will at least be aware of the need to control credit spending.
  • Think of the credit card as an emergency source of funds for essential expenses. Sure, they may use the card frivolously at some point, but suggest they leave it at home when they anticipate situations where they could make poor spending decisions.

Keep a low balance

  • If they carry a card balance, keep it below 25 percent of their available credit line. Credit rating agencies like cardholders to have a low credit balance that can be paid off easily. A higher card balance could reduce their credit score.
  • Pay the credit card bill on time, every month. Do this even if they only make the minimum monthly payment. No piece of their credit report is more important than their payment history.
  • Avoid using the credit card for expensive cash advances or personal loans. These options often come with higher interest rates and additional fees, making it more difficult for your college student to pay off the balance.
  • Limit applications for additional credit cards. One is enough. Plus, applying for multiple cards results in more inquiries to their credit report. Each new inquiry could also work to lower their overall credit rating.

When it comes to your college student and a credit card, discipline, moderation and timeliness are critical for protecting their credit future. It might be hard for your teen to imagine now, but their behavior in using credit today will impact their application for an auto loan or mortgage later.

If your student is a Zard accountholder, they may be eligible for an LGFCU Visa® Credit Card to help them purchase the things they need while building a positive credit history. To apply, log in to Member Connect or call us at 888.732.8562.

The advice provided is for informational purposes only. Contact a financial advisor for additional guidance. All card applications are subject to approval.


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