American college students are unfairly stigmatized as being fiscally irresponsible. A recent CBS Money Watch article perpetuates this stereotype by doubting student ability to handle the responsibilities of owning credit cards. Although the financial burdens of reckless credit card use can be harmful, they pale in comparison to the massive student loan debt shouldered by millions of graduates. With thousands of dollars of debt in students’ names, is a few hundred dollars of credit card debt really the problem?
Using a credit card does not necessarily lead to a financial crisis. For a person without any financial history, their credit card spending limit would be low, making it difficult to default on their bill. On the other hand, by obtaining credit cards during college, students can begin to build credit history early, which will ease the economic transition into adulthood. For more convenience, making use of a credit card can be an easier way to spend money without having to carry cash.
Important steps have been taken in the past several years to protect college students from credit card companies, particularly the passage of the Credit Card Accountability, Responsibility and Disclosure Act of 2009. In addition to limiting marketing strategies aimed at young adults, the act requires any financially insecure applicant under 21 to have a cosigner on their card. Previously, students over the age of 18 could sign up for a card without any confirmation of financial security. Although it is now significantly less risky for college students to obtain a credit card, it is still a highly personal decision that depends on an individual’s spending habits.
Credit card use, given the deceptive lack of spending cues, may not be the best choice for the overspender. It is argued that spending money via credit card establishes bad financial habits early in life. These habits, coupled with the possibility of identity theft, are reasons to think carefully about opening a credit card account during college, but are not reason enough to condemn signing up.
Financial literacy is low among most Americans, adults included. The average American household is encumbered with approximately $15,950 of debt and pays high interest rates. American high school students may be able to balance chemical equations, but many have never received a lesson on how to balance their checkbooks — only 17 states require a high school course in personal finance. By the time students begin college, they are long overdue for a lesson in fiscal responsibility. A credit card poses a relatively small risk to students, and when used sensibly it can offer a valuable lesson in financial literacy.
A version of this article appeared in the Sept. 8 print edition. Email the WSN Editorial Board at [email protected]