Monday, August 27, 2018

Thrifty Thinking: College Students and Credit

Nearly 5 million college students – 1 in 4 of those currently enrolled – believe an excellent credit score is worth more than a college degree, according to the personal-finance website WalletHub’s 2018 Student Money Survey. To help students achieve both while saving some money, WalletHub announced its picks for the year’s Best Student Credit Cards and Best Student Checking Accounts and gathered commentary from a number of leading experts.

Highlights of the report:

  • 45% of college students don’t have their own credit card account yet (25% are authorized users).
  • 1 in 3 college students think they’ll be worse off financially than their parents.
  • 4 in 10 college students say credit card debt worries them more than student loan debt.
  • Best Credit Card for Students: Journey Student Rewards from Capital One – 1% cash back across all purchases, plus an additional 0.25% when you pay your bill on time. No annual fee.
  • Best Checking Account for Students: Bank of Internet USA X Checking – No monthly fee or overdraft fee, and all domestic ATM fees are reimbursed.
I had a chance to interview analyst Jill Gonzalez to learn more.

Why is credit card debt so worrisome for students? 

"Credit card debt is worrisome for students mainly because they aren't taught much about personal finance in school. Almost half of college students don't have a credit card. The fact that they aren't familiarized with what it means to have a credit card and use it responsibly can be scary for them."

Why are many college students pessimistic about their financial future compared with their parents'? 

"Many college students are pessimistic about their financial future because of the amount of student loan debt they already have when they graduate. There is a lot of pressure on them to find a well paid job, so that they'll be able to start paying back their student loans. And they're only looking ahead to even more debt in the form of credit cards or a mortgage."

How can parents make sure that their college students are using credit responsibly and building their own credit?  

"Parents are the first financial role models of their children, and they should start educating their kids financially as early on as possible. One of the ways this can be done is by making them authorized users on a credit card. This way they can learn about how to use credit responsibly, and at the same time start building their own credit history and score. Then, hopefully, by the time they get to college and sign up for their own credit card, they'll know how important it is to pay their bills on time, and limit their spending only to what they can afford."

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