I turn 18 next month and am planning on attending Northeastern in the fall, and they gave me a pretty generous financial aid package. I will only have to take about $3,000 out per year in student loans. I don’t want to get any credit cards once I turn 18, because it seems like a risky path and I dont want to push my self further into debt. However, I do want to establish my credit, and I know that having no credit history is basically the same as having a horrible credit score. Would it be unwise to never have a credit card in college and only use a debit card? Or should I have at least one credit card?
It depends on how disciplined you are.
- Getting a credit card, using it responsibility, and paying the balance every month is a good step to build credit.
- Getting a credit card and being irresponsible has the exact opposite effect and can lead to digging a credit hole that can take a long time to recover from.
So, try it if you are ready for it. If you find that you don’t resist the temptation to overspend, give it to your parents to hold for you until you are ready.
Good luck!
Do you have a car? How about a gas credit card?
A credit score can be increased by having different types of credit - car loan, mortgage, credit cards, student loans. Your debit card is not going to be as good as a credit card. You don’t have to use it a lot, just once or twice a year and pay it off that month. Your debit card is really your checking account and you won’t get many more points than you get for the savings/checking.
Credit cards are fine, assuming you just pay them off every month. You will only get a very low limit anyway (initially) as you have no job and no money (security). Get a CC and use it for whatever you CAN afford. That is no different from a debit card.
@bjkmom I won’t have a car since I am going to school in the city, and the one I drive now is paid off.
A credit card is very different than a debit card in many many ways. A debit card takes the money out of your checking account and by law provides few protections. A lot of debit card issuers provide more protections, but they don’t have to and can change their policies upon notice. Credit cards have a lot of federal protections, purchase protections, dispute protections.
My D has a Discover student.credit card card (I’m sure there are other options as well) and pays the balance off.every month. She now has a very good credit score. The trick is to be disciplined a d only charge things you can afford to pay off immediately.
As well as having advantages as per above, you can also earn cashback, and have extended warranty, and one CC I have will price check any item you bother to upload for price corrections when offered (way too much effort but not for a student). My kid’s school doesn’t even charge extra to pay tuition on CC.
Another thing you can do with a credit card you don’t want to use and don’t want to forget to pay is to put one monthly charge on it - like netflix or spotify- and then put it on autopay. Your credit score will go up pretty fast because you’ll have activity on the card.
The Discover will give you a $500 “credit line” after you give them $500. It’s a secured credit card. After six months they give you back your $500.
@happy1 when you pay off the balance monthly is there interest?
Most of the time, there is a 25 day grace period (so bill is issued 1/1 and if you pay by 1/25 no interest. You need to look at the terms of the card.
If you have a bank you are comfortable with, apply there. You can usually move money easily between accounts.
No interest if you pay when it is due.
My D was not able to get a card from her bank. Make carefully inquiries before you apply and look for.credit cards specifically geared.to.studenta.
A credit card used effectively as a debit card is the best route. You’re going to buy food, basics, etc, so use the credit card for those, but only so much that you have money in the bank account to immediately pay the card off before you have to pay any interest. I’ve done that on now 4 cards for different uses (with different rewards benefits, all without any fees) and have actually made more money in the form of cash back without paying any interest and increasing my credit score. I think responsible credit use is the best plan. Be familiar with how credit scores work too. Credit Karma is a good piece of software to track and understand that as well as research cards.
If you have a bank account at a bank, they will typically be good giving you a credit card with a small limit, usually around 1K or lower. As mentioned, do your research first.
The Target credit card is also useful, as it’s low limit, easy to get, and applies a 5% discount at Target, which you’ll likely get dorm essentials at for cheap anyways at the city Target 15 minutes from campus.
get a credit card, put it on autopay, and only buy stuff that you know there’s money for in the bank account. Paying it off every month means no interest (check the terms, but that’s the usual situation). Use Mint (a free online service) that allows you to easily see your balances, due dates, etc. My kids both started with the Discover card, and quickly had good enough credit that they were offered Visa/MasterCard etc. They are both very disciplined and use autopay (HIGHLY RECOMMENDED as long as you know you aren’t going beyond your means).
My D got her first credit card in the summer after junior year. It is a Discover IT but it does not require any deposit. It just has a lower credit limit but still a couple thousands I think. It just does not have all the other benefits and 5% cash back of a regular Discover card.
Once my kids were driving (one of the family cars), I put them on one of my credit cards as an authorized user, so they could get gas, and in case of an emergency.
They always were responsible and asked if they needed to use the card for something else, and then paid me back.
My D was able to sign up for a Discover student credit card with a $1,000 credit limit last year when she was a college sophomore.
She uses it to pay for her groceries (she lives in an apartment), and we give her the money for the monthly payment, but it builds credit for her.
The Discover student card my D has is not secured. My D gets cash back and good student reward. The cash back she earns doubles on the anniversary of the day she opened it. She just cashed in like $70. She can use it at Amazon and some restaurants/stores.