Advantages and Disadvantages of Acquiring Your First Credit Card
Per the Sallie Mae’s National Study of Usage Rates & Trends of 2009, 91% of college students have at least 1 credit card.
More than half of the students have 4 or more cards. Before getting one, the question to ask is “am I going to pay off my credit card in full, month after month?” A yes to this question will mean that you will be well placed to make the most out of your credit card benefits without worrying about high interest payments and financial distress or even erosion. If it’s a no or not a big deal – prepare to watch your credit card balance grow while you incur a growing debt load.
Per Sallie Mae, only 17% of the students who have credit cards are paying off the balance in full each month. According to a student loan organization, an average college student, with at least one card, carries more than $2,500 in debt to credit cards.
Emergency Money: It works as a substitute for cash in case of emergencies. When you need to complete a last minute travelling arrangement or buy that expensive text book that you need for a term project, having a credit card handy will make all the difference. A majority of undergraduate students, 92% to be precise, are using their cards for all educational expenses outside of tuition. What is worrisome though is about 30% of them even use their card for paying their college tuition fees. If they are paying the monthly fees then that is fine; if not, their high interest debt may at some point overwhelm them.
Limited Liability and Card Attributes: You can keep track of your expenses. If your card or card number is stolen, you will not have to worry about having to pay back large sums of money you have not spent. You will be able to make better use of the myriad plans and discounts that are offered online for textbooks and study materials.
Building Credit Worthiness: One crucial reason to have a credit card as a student is that it helps you get a head start at building a sturdy and dependable credit history. Sallie Mae studies show that this financial trustworthiness may be unachievable though for about half of the students who use a credit card since an average college student incurs a debt load of more than $4,100 by graduation.
Rewards: You have the opportunity to enjoy the various rewards like travel miles and discounts available for student users.
Higher Interest Rates: Since students are considered high credit risk individuals, your card will most likely have a higher than usual interest rate. Even after knowing the high interest rates, 60% of the students were surprised with how indebted they became.
Extravagant Spending Habits: Overspending can result in increased rates of debt obligation. The Center for Responsible Lending states that the people in the 18 to 24 years age group need to put aside about 30% of their income to pay off their debt.
Extra Fees: Per the U.S. Public Interest Research Group’s (PIRG’s) Campus Credit Card Trap Report, 25% of students admitted to having paid a late fee while 15% had paid an over the limit fee.
Credit History & Score Woes: Duck 9 studies show that 7.2% of college students drop out of school altogether due to excessive debt incurred. If you fail to make your payments on time, you will end up with bad credit report even before you join the work force – only shooting yourself in the foot.
Ultimately, credit cards if mishandled can ruin your financial life for years, however, used correctly, credit cards can help you establish your credit worthiness for life, allowing you the opportunity to home or car ownership down the road. Below is a list of a number of cards for those who are interested in obtaining their first card, which often times means starting with a secured card if one hasn’t established credit before ( a secured card simply means you have to put down a small deposit, so if you default, the card company takes your deposit to pay off your balance). There’s other links to other unsecured cards listed as well. Good luck and be smart with your cards if you decide to get one!
Here are a few secured credit cards you could look into if you’re interested in getting one:
VISA Secured Credit Card – Reports to All 3 Major Bureaus
Get a Prepaid Visa Card – No credit check. Quick approval. Shop online, pay bills, use ATMs
Visa Prepaid RushCard – FREE Direct Deposit, Online Pay Bills, Get Cash from ATM’s, Guaranteed Approval!
Silver Prepaid MasterCard card
100% Guaranteed Approval Debit MasterCard
Here are a few unsecured credit card reviews you could look into if you’re interested in getting one:
- Going to get a Discover credit card? Find out the best card with these 8 Discover cards reviews.
- Chase Credit Cards promotions and reviews; Freedom, Slate, and Sapphire Cards
- Cash Back Credit Cards reviewed and compared
- Several of the best travel reward credit cards reviewed and compared
- A review of several 0% balance transfer credit cards