Money matters: The power of plastic

Jim McCrane

This article probably contradicts the opinions of many parents and so-called “experts,” who express concerns that students who use credit cards risk piling up more debt than they can afford. Such concerns are valid if students have problems exhibiting self-control over their spending. In reality, we understand that credit card bills obviously have to be paid, and there are many advantages to using a credit card instead of cash or checks. As a result, all students should own and use regularly at least one credit card.

The single most important benefit of credit card usage applies to students who want to take out a home or car loan in the future, or even those who want to own a cell phone in their own names. Having a credit card establishes a credit history, which is vital for lenders and companies to determine whether someone should be accepted for a loan and whether they are responsible about spending money. The caveat to developing credit is that missed payments or overspending can damage a person’s credit. Bad credit is worse than having no credit at all, so credit cards must be used responsibly. A consistently-strong credit history can allow students to obtain a cell phone without a deposit or get a first car loan at the lowest interest rate available.

A plethora of other benefits apply to credit card use as well. All major credit cards have a grace period on new purchases. Basically, anything purchased on the card is interest-free for about a month, or until the bill is due. As long as the balance is paid off, the card provides a free loan for the period between purchase and due date. Such a perk is extremely useful for those students who may have to wait for a paycheck to purchase an item that they want. Students just have to realize that this benefit disappears if the balance is not fully paid off by the bill’s due date or else large interest charges usually apply.

Credit cards offer security far above and beyond other payment methods. Cardholders are never responsible for any unauthorized charges if the card is stolen. At the same time, especially when shopping online if fraudulent merchants charge a credit card account but fail to deliver the promised services or goods, the card company will protect the user from any charges related to such fraud. This type of security simply does not exist with cash or checks. Credit cards offer recourse for their holders in most situations, whether the user has been wronged by illegal activity from other individuals or merchants.

Students’ first credit cards should have no annual fee and should be either a Visa or MasterCard, since these cards are the most widely accepted and many banks offer these cards specifically for students who would not otherwise qualify due to a lack of sufficient yearly income. Citibank offers some student cards that pay one percent cash back on every purchase, which is another benefit of using the card. Other banks including Chase and Capital One offer student cards as well, albeit without a similar rewards program to Citibank’s.

Students who feel comfortable about their spending habits should apply for a credit card in their own names if they do not already have them. Benefits of using cards exist, both for the present and the future, especially in building a credit history that potential lenders find favorable. Credit cards offer convenience, security and perks above and beyond what cash or other forms of payment can provide. I strongly recommend that all students visit bank web sites to gain a better understanding of the cards available and to apply for one that looks desirable.