Empty Nest Magazine
Credit Cards for Young Adults:
Blessing or Curse?
by Amie A. Bonner
So, within only two months of my arrival on campus, I already had three credit cards and $1,500 worth of credit. That was in 2000. And, since then, credit card companies have only increased the fervor with which they pursue college students. Consequently, many students have fallen victim to the siren call of the credit card.
Beyond Their Means
On the basis of these numbers, it’s easy to understand why earlier this year, Congress passed the Fair Credit Reporting Act, which requires that those under 21 years old provide proof of their ability to pay for purchases or obtain a co-signer in order to apply for a credit card. The intent is that the co-signer requirement will force students to talk to their parents about the responsibilities of credit and not just fall into the misguided use of such cards as “free money.”
The Sallie Mae study showed that those students who had never discussed credit cards with their parents were more likely to use them without heed. In addition, the need to prove that they can pay will help students realize that purchases made on credit cards must be paid for, just as regular cash purchases would be. The college student who signs up for a credit card on these terms will, it is hoped, join a more debt-conscious generation of Americans.
Benefits of Credit
1. A credit card removes the danger of carrying large quantities of cash.
2. It provides purchase protection if the card is ever stolen or erroneous charges are made.
3. It allows easy tracking of purchases and expenditures.
4. Most important (especially for college students) is that the prudent use of credit cards builds credit history.
The earlier a student can own a credit card, the sooner he or she can begin to establish a credit history. Good credit history can make a big difference to the young adult who has graduated and is now attempting to rent an apartment or buy a car. Graduates with no credit history may find themselves unable to sign a lease or obtain a loan without a co-signer, which could prevent them from “getting out on their own.”
As with so many things, the relative virtue or vice of a credit card depends largely on the hands into which it falls. A knowledgeable user can make a credit card work to his or her advantage, whereas an ignorant consumer may soon be at the mercy of the banks. The best situation for a student (or anyone) is to get a credit card, use it minimally, and pay the balance each month.
But Lead Us Not…
Amie Bonner is an aeronautical engineer with Lockheed Martin, in Palmdale, CA. When she’s not designing airplanes, Amie is watching her credit, calculating her investments, and planning for retirement. She had no problem handling credit cards in college (or afterward). She and her husband Todd Wesley, and their two cats Fiona and Trillian, live in the desert in Southern California. Amie last wrote for Empty Nest about Retirement Planning, in summer 2007.
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