College students are notorious for being low on cash. For this reason, many turn to a student credit card.
While there are advantages of using a credit card in college, such as building good financial habits, there are some definite risks involved. Here are three of the biggest:
• Overspending. Hands down, this is the top risk associated with a student credit card. If you aren’t confident in your ability to spend in a responsible manner, you should avoid this altogether. Once you gain access to a credit card, you may begin to spend money that you can’t afford to pay back in a timely manner.
• Interest and fees. You should set the goal of paying off your balance in full each month. Doing so allows you to avoid interest charges. Furthermore, make sure you understand the fee schedule associated with your credit card. For example, how much are you charged for a late payment?
• Debt. This goes along with overspending and can have a long term impact on your finances. Credit card debt in college can put you on the wrong path for the rest of your life. If you get into the habit of carrying this type of debt, it can be difficult to reclaim control.
These may not be the only risks associated with the use of a student credit card, but they are definitely at the top of the list.
It doesn’t matter if you are a college student or the parent of one, make sure you are familiar with the pros and cons of credit card use.
Would you add any other risks to this list? Share your thoughts in the comment section below.