Financial Planning

You see them walking around campuses with their big smiles and clipboards- people trying to get students to open credit card accounts. They lure students with shiny free gifts and before you know it, your child has just gotten his or her first credit card. Aside from being sad that your baby is finally growing up, you worry whether giving a student a credit card is really a good idea.

The truth is, credit card companies flock to students like fish to water because they think these youngsters are easily influenced. Some students are not financially responsible and these companies know it. When a student makes a bad choice with a credit card, the credit card company benefits.

Responsible use of credit cards, no matter what age the card holder, helps to build credit. Credit is necessary to qualify for auto loans, home mortgages, and, in some states, the best auto insurance rates. If they are able to handle the responsibility, students should get a credit card for this reason.

One of the negative aspects of student credit cards in and of themselves is they tend to have very high rates of interest. The credit card company is relying on the fact that students will spend more than they can afford. When the student has to make installment payments, the credit card company adds the interest received to its growing fortune.

Having a credit card may come in handy if the student ever gets into a financial emergency. In addition, it is often difficult to make online purchases for things like books and school supplies without a credit card. To get the most benefit from their credit cards, students should pay their bills in full and on time each month, read the fine print, and protect the card from theft.