The risks and benefits of using a credit card

Angela Radesic

For college students, money is almost always tight. Credit cards can be viewed as a reward and a relief for students when money is low.

Brandon Michael, the supply chain development program materials planner and production scheduler at Bendix, believes credit cards can be beneficial to building a future for a college student — as long as they are used correctly.

“The top reason to get a credit card in college is to establish some sort of credit,” Michael said. “Even having minimal spending on a credit card and paying it back in full can get you started on the right foot when it comes to making bigger purchases after college.”

Learning to limit spending and what to spend money on can help prevent financial debt before leaving college. Overcharging a credit card for daily Starbucks trips can add up over time.

While establishing credit is very important while in college, credit cards can also be good for emergency situations.

“It would be beneficial for a college student to have a credit card to pay for unexpected medical or transportation expenses during the period of enrollment,” said Sharon Feess, the vice president of Wortham Oil and Gas.

Having a credit card in those situations helps prevent draining a savings or checking account in an emergency.

While being a benefit in emergency situations, interest is something to look out for when charging up a credit card.

“Credit companies often give students lower interest rates and earnings back when specific purchases like gas and food are used on the card,” Michael said. “Though, remember, credit cards are not free money. College students should not be spending money on a credit card that they do not have.”

Charging purchases on gas and food can oftentimes give cash rewards, depending on the credit card company. Immediately paying off credit card charges in full can be a strong way to build credit while minimizing debt buildup.

“The main purpose to having a credit card in college is to build credit,” Michael said. “Use it only on specific purchases that you know at the end of the month you can pay back in full. The goal should be to pay zero percent interest because you paid it off fully in time. Don’t lose money by paying interest on beer. Your credit score follows you everywhere. Don’t start off in a hole just because you couldn’t manage it correctly early on.”

Credit cards, while being beneficial, can also be extremely risky.

“There are many risks associated with getting a credit card when a student is in college,” Feess said. “One of these risks is the unavailable funds to repay charges within the next month. Second, the uncontrolled spending of non-essential consumer purchasing, and third, the higher interest rates for funds.”

These are all things to look out for when obtaining a credit card while in college. Being aware of the risks at hand and staying on top of payments can help to reduce the chance of paying interest and racking up debt.

“The majority of college students don’t understand personal finances properly,” Michael said. “Especially in college, excessive spending on a credit card is a poor decision. Putting yourself in debt, not including student loans, will haunt someone for years after they graduate.”

Angela Radesic is the jobs and finance reporter. Contact her at [email protected].