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College students, debt, and credit cards

Many college students don’t enter college with a credit card in their name, but most leave with at least one. While establishing your credit history is a great thing to get started on while you are in college, there are some caveats to applying for and using credit cards in school. After all, more than one careless college student has racked up a mound of credit card debt before reaching graduation.

When you are choosing a card to apply for, compare the terms and options, instead of the free product creditors are offering. Find a card from a large bank that has no minimum fee, and offers a low interest rate. Given the small amount of charges you’re likely to make, skip cards that offer rewards, because you are unlikely to charge enough to receive them. 

It’s incredibly tempting to use your credit card to go on a shopping spree, but you should seriously reconsider doing this. It’s very easy to quickly amass significant credit card debt, and making the minimum monthly payment on a large balance usually doesn’t even cover the interest charged for the month. With compounding interest (interest that is charged on interest you’ve been charged), you can find yourself owing significant money before you even graduate from college.

There are some definite positives to getting a credit card when you are in college, however. Having a history of responsible credit, especially making on time payments, is essential if you want to have good credit in the future. Credit agencies consider the length of your credit history when assigning credit scores. In addition, having a credit card is always good when emergencies strike, especially if you are away from home. Develop the willpower to avoid charging unnecessary purchases, and you will be on the path to a life of responsible credit use.