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Learning about your credit can be a little overwhelming. Just knowing how to make sense of your credit score can be difficult, especially with three credit bureaus and their different ways of computing your score. But building a good credit score early can help you accomplish the things you’ll want to do after college, like buying a car or a home. Learn how having a credit card in college can help or hinder your credit in the long run.

Student Debt in America

You might have heard horror stories about college students graduating with more than a degree. The average college graduate in 2017 has acquired $37,712 in debt, with the total U.S. student debt reaching $1.4 trillion. Most of this debt comes from student loans and credit cards, which isn’t surprising with the rising costs of a college education. But it’s not all bad news. Fortunately, not all debt is bad.

Good Debt vs. Bad Debt

Not all debt is created equal. Lenders expect people to have some debt. Debt that shows you’re making an investment in yourself can be good, like student loans, home loans and small business loans.

Other types of debt may be considered bad by lenders because they don’t show a return on investment. For instance, an auto loan might be necessary for transportation, but vehicles begin depreciating as soon as they’re driven off the lot. Instant depreciation isn’t favorable as far as lenders are concerned.

Building Good Credit Early

College is a time for learning, and one of the best things you can learn financially is how to build good credit. If you don’t build good credit early, or worse, end up with bad credit as a result of reckless decisions, you could find yourself playing catch-up for a long time. Credit cards can be a useful resource for building good credit if managed properly. Good credit is important because it plays a role in many things you might not realize, like:

  • Lowering your insurance rates
  • Obtaining a job
  • Signing up for a cell phone plan
  • Getting an apartment

Pros of Having a Credit Card in College

Having a credit card while you’re still in college can help you establish good credit early. This makes it easier when you start making decisions and bigger life purchases after graduation. But having a credit card helps you in other ways, too.

Some credit card companies offer budgeting programs and apps that let users learn how to budget by separating expenses into categories such as food, clothing and entertainment. Along with your monthly statements, you’ll be able to see where your money is going.

Credit cards also let you make secure purchases online, something you can’t do with cash. Some people feel less secure when carrying cash, so credit cards may provide a sense of security for you and your wallet.

Cons of Having a Credit Card in College

Although having a credit card early can offer multiple benefits, you still have to be careful. Some companies take advantage of students by charging high interest rates and increasing spending limits quickly, which can give you a false sense of security. If you overspend, you could end up being in debt for years after graduation. Other disadvantages include:

  • A lower credit score if payments are missed or if credit utilization is too high
  • Higher debt due to interest accumulation when balances aren’t paid off every month
  • Higher balances if annual fees are charged
  • Less money available for savings if it’s spent on credit card bills

What to Look for in a Student Credit Card

If you decide to go the credit card route while you’re a college student, there are a few things that can make the financial road smoother.


Look for cards with no fees. Read the fine print on the application and find a card that doesn’t charge an annual fee just for having the card.


Watch the interest rate. The lower the rate, the less you have to pay back. Rates can also change, especially if you’re looking at student cards. If there’s 0% interest for the first year, you’ll want to check and see what that rate jumps up to after the first year.


Check out the benefits associated with the card before settling on one. Some credit card companies offer rewards for spending in categories like dining and entertainment, which can save you money right away. Some offer airline points, which may be particularly useful if you attend college out of state but want to visit family and friends.

Other Ways to Build Credit

If you want to build your credit without going the credit card route, there are other avenues to a good score.

Small Loans

Some banks and credit unions offer “credit-builder” loans. These are usually small loans ($1,000 or less) with low interest rates. As long as you make your payments on time, the lender reports more often to the credit bureaus, which can increase your score.

Federal Student Loans

I wouldn’t recommended actively seeking out students loans if you don’t need them, but if you do need to take out student loans, you could use to it to your benefit. Federal student loans can build your credit, but you’ll need to make payments while in college to increase your score before graduation.


Having bills in your name is another good way to build your credit without a credit card. For example, if you already rent an apartment or house, you may be able to get credit for on-time rent payments.

Whether you want to get a credit card or build credit other ways in college is up to you, and everyone’s situation is different. If you decide to get a credit card, remember to avoid the common mistakes people sometimes make.

Are you a college student who uses a credit card? What made you take the plunge, and what types of purchases do you use the card for? Share your advice with fellow collegiate readers below!

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