Empty pockets are a common problem college students face. The financial demands of housing, books, tuition, transportation and living expenses are challenging enough. Forget about having extra money for movies, eating out, clothes, vacations and other money gobbling activities that college students wish they had the cash for.
Credit card companies know this best, and that’s why they target students with “too good to pass up” deals. It may seem like a great deal to score a free meal at the local sandwich shop just for filling out a credit card application, but the implications of credit cards for college students are not worth the free lunch.
Go to any neighborhood surrounding a college campus and chances are you’ll see tables stacked with credit card applications offering free food, books, gift cards, etc. Card companies know that the future implications of credit card debt may not be the foremost thought to a hungry, broke student when the opportunity for free stuff presents its self. The result creates a naïve credit-card yielding college student with a free sandwich.
It may not seem like such a big deal at the time, but extreme interest rates make small here-and-there purchases add up quick. Some of the credit cards being pawned onto young people come with rates up to 26%. A night at the bar, a trip to the mall, a weekend out of town and a dinner out with friends can quickly grow to an overwhelming debt.
Even worse is the damage that irresponsible credit card habits create. Failing to make payments on time every month or maxing out cards will damage credit scores. Try buying a car, renting an apartment or buying a house with bad credit; you’ll either here the word “no” often or be flattened with even higher interest rates.
That free sandwich doesn’t seem worth it now, does it?
Despite the possible outcomes, credit cards aren’t all bad. In an emergency it’s good to have options and a credit card is a valuable resource. Responsible credit card use is an excellent way to build good credit. Paying off the entire balance each month builds good credit and frequently results in higher spending limits and lower interest rates.
The bottom line is that signing up for a credit card is a big deal, with future implications and should be taken seriously. Use a credit card to build credit for important life factors after college and remember that in the end there is no free lunch.