Before and During College: Help Your Student Avoid Credit Card Traps

By: Tom Melecki

There’s nothing inherently wrong with college students having credit cards. In fact, 56% of them posses at least one. But help your student beware of all those offers from banks and other credit card providers at this time of year.

After all, a credit card is an opportunity to rapidly amass high interest debt, and only predatory lenders would push such an opportunity at a naive 18-24 year-old with no regular income. In the words of Bernie Sanders:

What the . . . credit card companies are doing is not really much different from what gangsters and loan sharks do. . . . While bankers . . . don’t break the knee caps of those who can’t pay back, they still are destroying peoples’ lives.

So advise your student to ignore those unsolicited offers. Just the act of applying for multiple cards within a short period can cause her credit rating to take a dive. Instead, advise her to carefully search for and start with a single credit card — one without annual fees and, if study-abroad is in her future, without foreign transaction fees. Adding another credit card later is an option that can actually help build up her credit rating, but only after she’s learned the ropes.

There’s more danger, of course, once your student obtains a credit card. It poses an almost irresistible temptation to a young person facing the pressures of keeping up with more affluent peers in an environment full of spending opportunities.

In short, a credit card makes it far too easy to shell out too much. The credit card provider hopes she’ll do this, because then it gets to add interest and fees that may exceed 20% of whatever’s unpaid by the monthly due date. Her credit rating gets damaged, too. To keep this from happening, the provider figures you’ll cover the unpaid balance for her.

Still, when properly managed, a credit card offers certain benefits — funding for emergencies, small savings if it’s a reward card, a record of purchases. Moreover, if paid in full every month, your student will establish a strong credit score that’ll help her borrow for a car, home, and other big post-college purchases.

Help protect your student from the dangers and reap the benefits described above! Be assertive in coaching her about credit card management both before and after she goes to campus. Make sure her college credit experience is a good one!

Contact College Affordability Solutions for more information about how students and families can manage college-related expenses well.

This article originally appeared on www.collegeafford.com


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Dr. Tom Melecki is the founder of College Affordability Solutions. He created it in 2015 after retiring from a 39 year career in postsecondary education. His work in college affordability began at The University of Texas Austin (UT), where he served for 10 years in the financial aid office, including as the director of that office during the last seven years of his postsecondary career. collegeafford.com