The Responsibility of Bearing a Credit Card as a College Student

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A credit card is defined as a small plastic card issued by a bank or business, allowing the holder to purchase goods or services on credit. Credit is defined as the ability of a customer to obtain goods or services before payment, based on the trust that payment will be made in the future. Parents know how important a good credit score is, but when would be the right time to start building credit for their kids? For some parents they believe that they should start as soon as possible, of course when they feel their child can manage cash appropriately.

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Some parents think that their kids are not going to be responsible enough to handle and tell their kids to wait until they have their own job. Parents have wondered when the right time is over the years, but take a look at the four articles: “The Case for College Students to Have Credit Cards” by Erin Lowry says students who are responsible enough to get credit cards should build their credit scores when they can.

“Should College Students Have Credit Cards?” by Colleen Kane talks about how students can build credit with a secured credit card if students are not ready for the real deal. “Do Students Need a Credit Card In College?” by Scott Gamm states how a credit card can build credit but not all students are ready to accept the responsibilities that come with a credit card. “College Students Don’t Have A Clue How Credit Cards Work” by Business Insider tells us how students will not be responsible once they obtain a credit card, also not understand the consequences that occur when you do not pay the bill on time.

With these articles in mind, college students not ready to begin their credit life in college because they will always want to spend money.

Responsibility

Parents always have the question of whether or not their child is ready to take responsibility for a credit card. Lowry (2014) claims “The decision whether or not to apply for a credit card should be made based on self-awareness and fiscal responsibility.” College students can be ready whenever they think they can handle the responsibility, rather than parents. Parents will have the ultimate decision but college students will know themselves better to whether or not they can pay the bill. Kane (2012) says that parents should “Be aware of other cards your child may have, like debit cards that go with his or her new checking account. Make sure they set up overdraft protection as a safety net for those adjusting to the concept of balancing a budget”. Kids will always have a tendency to over spend but will try to be responsible for their spending, although there is always a backup plan in case they do over spend. With overdraft security, the student will not be penalized as heavily with spending more than what they have, but instead the credit card company will be more reasonable with the fee charged for over spending. Gamm (2014) says “The temptation to spend may be too high and result in significant balances or even worse, default, which would harm their credit for years”. College students will spend money and sometimes are not responsible enough to handle the amount of debt they obtain while having “fun”. We all know college students will want items at the register as they wait to pay for their items that are necessary, but with the proper management of money the student can buy those items once in a while. Business Insider (2012) claims “13% of students use their credit cards frequently to use as emergencies” but this is a very high percentage for deeming items bought for emergencies. College students will always want to spend more and more money that they don’t have, therefore they cannot always be responsible with a credit card.

Debit Cards

A debit card is an account made with a bank that allows the customer to spend money by swiping a plastic card just like a credit card, except debit cards hold a specific amount of cash put into the account to begin with rather than using credit. Although debit cards do not build credit, it is a practical way of spending money. For example if there is no money left in the debit account there is no money to be spent. Lowry (2014) states “If a thief gets a hold of a debit card, he or she can effectively drain a bank account instead of just racking up fraudulent charges on a credit card.”. Lowry (2014) believes that debit cards are not the answer to spending because of the risks that could occur when stolen. Lowry (2014) thinks that credit cards are much safer because if it stolen, fraudulent charges can be reported and no penalty will be given to the issuer of the card. On the other hand Kane (2012) informs that “Until more parents teach their kids about money, I recommend a graduated path from cash, prepaid, ATM, authorize, cosign, secured, to unsecured credit cards.” Since Kane (2012) thinks that students will not be ready for a credit card right away, moving step by step to a credit card would be a better answer. Kane (2012) loves to see students with debit cards first because it promotes good financial planning. Kane (2012) also believes that if students can manage cash and debit cards well, they will understand the importance of money. An interesting twist is that Gamm (2014) agrees with Kane on this subject matter. Gamm (2014) says that “Students should have a debit card regardless, which is linked to a checking account.” But Gamm (2014) encourages students have a debit card because it will be their primary source of spending money. Although Gamm (2014) wants to see students use credit cards for luxury expenses, the debit card would cover necessary expenses such as groceries. With spending money in this manner, we will see a steady build in credit rather than a large lump sum of debt at once. Business Insider (2012) on the other hand has no facts about debit cards, but rather only states that credit cards are not always the best idea for students to have in college.

Co-signers

Another point parents stress about is how the student will obtain a credit card if they have no credit. Lowry (2014) does not state much about how to obtain a credit card, but claims that there are only benefits using a credit card. Kane (2012) says “thanks to 2009’s CARD Act, students must now demonstrate financial capability or have a creditworthy co-signer in order to get a credit card”. A co-signer would be someone with a good credit score, or steady income that would pay the bill in case the original recipient did not pay. With a co-signer the payments will always be paid for if the student forgets or cannot pay for the bill. Gamm (2014) agrees with Kane’s (2012) ideas, “If parents have a solid credit history, adding their kids to the card as an authorized user is a nifty way for kids to build credit”. Gamm (2014) is saying kids can get their credit card by being added to their parents’ accounts and still build credit. With kids on their credit card account, the amount they spend will be repaid by the kid, but this way the student can build their own credit and be ahead of the game for future loans. Business Insider (2012) also says that co-signers are a good idea to obtain a credit card, but “credit card knowledge is lacking around America”. Co-signers are a great way to obtain a credit card if you have no credit and want to build credit, but still students need to understand the responsibilities that come with the plastic card we swipe aimlessly when shopping.

Management

Responsibility is one concern of the parents but parents also worry about how they will pay for their bill. Lowry (2014) says that kids can “apply for a secured card to prove their responsibility”. The college students can prove to their parents that they can pay off their bill by using a secured credit card as a trial period. Kane (2012) also agrees with Lowry (2014) that “One strategy is to arrange for a secured credit card”. This supports the idea that getting a secured credit card will be a good idea to have college students become more responsible with credit cards. Gamm (2014) goes against both Lowry (2014) and Kane (2012) by stating “For parents, seeing their kids use cash responsibly may indicate to them that they're ready for a credit card”. Gamm (2014) sees that using cash is a good responsibility for college students to manage money because once you’re out of cash, you’re out of money. If students can manage cash, they will find a way to pay their bills. Business Insider (2012) claims that “90% of college students have some sort of credit card debt each month”. Business Insider (2012) states that since college students are in debt, how can college students possibly pay off their bill?

Conclusion

When the question “should college students have credit cards?” arises, we must carefully examine each student because everyone is different. First the student should be evaluated with cash to get a better understanding of what their spending habits are, and also to see if they will find a way to get what they want if they don’t have enough money. Students will be able to learn how to manage money better with this type of experience and will most likely transfer this experience when using credit cards and paying bills. Although not every student is capable of handling credit cards, they can still get debit and secured credit cards. With debt cards the user only spend as much that is on the account before getting charged for over drafting. With secured credit cards, the user cannot over draft money because it works as a prepaid card, therefore the penalties are a lot less severe than credit card companies. Ultimately the choice of whether college students should have credit cards would be no. The reason is that students will always want to spend money they do not have, and cannot pay the price that those items cost. College students can be responsible but there will always be that one new invention that everyone will want and a credit card could buy that item, but in return lead students into debt. Students on campus should only need a debit card or secured credit card because only purchases on campus/in a store should be made. Online shopping is where most college students’ fall into peer pressure and want to buy more than we can afford. Therefore college students should not have credit cards because they will spend money that they do not have to repay credit card companies.