Once you reach the age of eighteen, you are given all sorts of new rights and privileges. Some are obviously a good thing, such as the right to vote. But what about the ability to apply for credit cards… is that good or bad?
Growing up, we’ve all heard stories of people having credit card debt problems. Perhaps someone in your own family may have faced such a predicament themselves. Now that you have the opportunity to get your own, what should you do? I asked Michael Davis of CreditCardForum.com for his input. Here’s what he had to say:
“Make no mistake about it, credit cards can be a problem for many. If you have difficulty controlling your spending, then it would probably be best to avoid them for now. However if you can spend responsibly, then applying for a credit card as an eighteen or nineteen may not be a bad idea.”
But what constitutes “spending responsibly.” Does that mean paying off your bill in month? Or does it mean being able to afford the minimum payment? I pressed Michael for a more detailed explanation and this is what he said:
“In my personal opinion, I think it’s best for teenagers and college students to pay their credit card bills in full every month. That is what I would consider responsible. Because the APR on student cards is so high, it can be detrimental to carry a balance. For example, on our site we have a list of the best credit cards for college students, but even those “best” cards still have interest rates as high as 20% or more! At such a high rate, it would just be a bad idea to carry a balance.”
Once he said this, I was a bit confused. If the APR on college student credit cards is so high and you can’t use them to borrow money, then what’ the point of getting one in the first place? Why not just use a debit card instead so you don’t overspend? Michael responded:
“Well they do have other benefits that debit cards don’t have. For example, the student version of the Discover More credit cardgives up to 5% cash back. The American Express Green card doesn’t have the best rewards, but it does give a lot of benefits like a free extended warranty on purchases. So even though these entry level credit cards aren’t the best for borrowing, they do offer some nice perks.”
They may offer perks, but if those “perks” incentivize you to spend more than you can afford, then it would really be best to stay away from charge cards altogether. Not only can compound interest make you wealthy (like it did for Warren Buffett) but it also can work the opposite way and make you broke faster than you can imagine. For this reason, I agree with Michael that applying for credit cards as a college student should be avoided altogether if you think it will lead to debt.
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