9 Credit Card Mistakes College Students Make – and How to Avoid Them

Discover the most common credit card mistakes college students make and how to avoid them. Learn from mistakes so you don’t have to repeat them.


With the widespread availability of credit cards, it is essential for college students to be aware of their potential consequences and take responsibility for their credit card usage.

Unfortunately, many college students make costly mistakes when managing credit cards, leading to adverse economic consequences in the past.

A study conducted by C. Robb from the Journal of Family and Economic Issues examined the relationship between financial knowledge and credit card behavior of college students, finding that those with higher scores on a measure of personal financial knowledge were more likely to engage in responsible credit card use.

In this article, we will explore 10 common mistakes college students make with credit cards and how they can avoid them. From getting too many cards to allowing friends access and failing to build credit, these poor decisions, if left unchecked, can lead to long-term financial hardship.

With just a few simple tips, you can start building better credit habits today and reap the rewards tomorrow!



9 Credit Card Mistakes College Students Make - and How to Avoid Them
9 Credit Card Mistakes College Students Make

1. Misunderstanding How Credit Cards Work

Opening a credit card in college is an important step for many students, as it can be their first experience with revolving credit.

It’s important to understand how this type of credit works before making purchases. Credit cards allow you to make purchases without paying for them upfront.

Still, all transactions are listed on your statement as a balance that must be paid in full before the payment due date or else you will incur interest.

Further, each card comes with a specific credit limit, the total amount of money available to you. Using your credit card responsibly is key to building your financial future.

Paying off your balance every month and never missing a payment will help improve your credit score and increase your chances of getting approved for more lines of credit like car loans or mortgages.

It’s also wise to try and stay below 30% of your total credit limit when making purchases – this helps demonstrate that you’re aware of how much money is available and prevents overextending yourself financially.

If you get approved for a larger line of credits, use it responsibly by only charging what can reasonably be paid back in full. This way, you won’t have to worry about dealing with interest payments or long-term debt down the road.

With good habits in place, your bank may even consider increasing your credit limit over time!

Key Points

  • Opening a credit card in college can be a student’s first experience with revolving credit.
  • Credit cards allow purchases without paying upfront, but transactions are listed as a balance that must be paid in full before the payment due date or interest will be incurred.
  • Each card has a specific credit limit, the total amount of money available to you.
  • Using credit cards responsibly is key to building a good financial future.
  • Paying off the balance every month and never missing a payment will help improve your credit score and increase your chances of getting approved for more lines of credit.
  • Stay below 30% of the total credit limit when making purchases to demonstrate awareness of available money and prevent overextending financially.
  • If approved for a larger line of credit, use it responsibly by only charging what can reasonably be paid back in full to avoid interest payments or long-term debt.
  • Good habits may lead to consideration for increasing credit limits over time.

2. The dangers of impulse buying and lack of planning

Regarding credit cards, impulsive buying and poor planning can lead to disastrous consequences. College students must carefully consider their purchases and budget before swiping their credit cards.

If you’re not prepared for the financial responsibility of using a credit card, you could quickly find yourself in debt and unable to pay off your balance.

For example, suppose you buy something on a whim without considering how much money you have available or whether you’ll be able to make the payments. In that case, you are likely setting yourself up for failure.

Furthermore, suppose you don’t take any steps to create a realistic budget or repayment plan. In that case, it will be even harder for you to manage your finances responsibly.

Another thing college students should pay attention to is understanding the interest rates associated with their credit cards. High-interest rates can compound over time, making it more difficult to pay off your monthly balance.

So it is important that when signing up for a new credit card, college students consider the type of card they are getting and what interest rate they will be paying on any outstanding balances.

Finally, college students must remember that having access to a credit card does not give them an excuse to splurge on unnecessary items without considering their financial situation and budgeting appropriately.

Impulse buying can lead to serious financial issues down the road, further complicating your already strained finances.

Therefore, college students must think before they shop and use their credit cards responsibly.

Key Points

  • Impulsive buying and lack of planning can lead to disastrous consequences regarding credit cards.
  • College students should consider their purchases and budget before using their credit cards.
  • Not being prepared for the financial responsibility of using a credit card can lead to debt and difficulty paying off the balance.
  • Importance of creating a realistic budget and repayment plan to manage finances responsibly.
  • Understanding the interest rates associated with credit cards and considering them when signing up for a new card.
  • Having access to a credit card does not excuse splurging on unnecessary items without considering the financial situation and budgeting appropriately.
  • Impulse buying can lead to serious financial issues in the future. It is essential to think before shopping and using credit cards responsibly.

3. Choosing the wrong type of credit card

Choosing the wrong credit card type can be costly for college students. Credit cards are widely available and convenient, but using the wrong type or misusing it can cause serious financial issues.

Researching and finding a card that meets your needs without exposing you to unnecessary risks is important. A cash-back rewards card or secured card is a good starting point for new credit users.

A cash-back rewards card gives you a % of the money spent back after each purchase. In contrast, a secured card requires a small deposit as collateral that will lower the risk for the credit card issuer.

For example, the Citi® Double Cash Card lets you earn 2% cash back on all purchases and has no annual fee. Meanwhile, Discover It Secured Credit Card offers 2% cash back at gas stations and restaurants with no annual fee while also letting you check your FICO score free.

Alternatively, becoming an authorized user on a parent’s or loved one’s credit card allows you to gain access to the account while still building your credit score.

This is beneficial if you need access to funds in case of an emergency but don’t want all of the responsibility associated with having your credit account yet.

No matter what type of credit card you choose, it is important to practice good spending habits since this will help establish good financial habits in the future and may even result in banks refunding your deposit or inviting you to apply for an unsecured card.

Key Points

  • Choosing the wrong credit card type can be costly for college students.
  • Researching and finding a card that meets your needs without exposing you to unnecessary risks is important.
  • A cash-back rewards card or secured card is a good starting point for new credit users.
  • A cash-back rewards card gives a percentage of money spent back after each purchase. In contrast, a secured card requires a small deposit as collateral that will lower the risk for the credit card issuer.
  • Citi® Double Cash Card and Discover It Secured Credit Card are good options.
  • Becoming an authorized user on a parent’s or loved one’s credit card allows access to the account while building a credit score.
  • Practice good spending habits, which will establish good financial habits in the future and may even result in banks refunding your deposit or inviting you to apply for an unsecured card.

4. The risks of lending out your credit card

Sharing your credit card can be a risky endeavor, especially when it comes to college students. Most people don’t realize that they are responsible for all transactions made with their card, even if it was not them who used it.

For example, if a family member or friend borrows your credit card and makes purchases without permission, you will still be liable for the debt once the bill arrives.

Furthermore, merchants may require an identity check on large purchases, which can lead to your credit card being confiscated if it is not in your possession.

Additionally, allowing someone else to use your card can result in unexpectedly high balances from purchases you weren’t aware of.

This means that despite only lending out the card once, you could end up paying back multiple charges made by others without your consent.

Therefore, college students should be wary of lending out their credit cards and always remember that they are ultimately responsible for all transactions made with their cards.

Key Points

  • Sharing your credit card can be risky, especially for college students.
  • People are responsible for all transactions made with their card, even if it was not them who used it.
  • Borrowing by a family member or friend without permission, still liable for the debt once the bill arrives.
  • Merchants may require identity check on large purchases, which can lead to the credit card being confiscated if it is not in your possession.
  • Unexpected high balances from purchases you were unaware of can occur if someone else uses your card.
  • College students should be wary of lending out their credit cards and remember that they are ultimately responsible for all transactions made with their cards.

5. The importance of using your credit card responsibly

Using your credit card responsibly is essential to maintain a healthy credit score. It’s important to remember that when you make purchases with your card, you are taking out a loan and will have to pay it back later.

Paying off the balance in full each month and keeping credit utilization low (30% or less of your total available credit) are key components of responsible use.

Avoiding late payments and fees is also important; if you can’t make the minimum payment, contact the issuer immediately to set up an alternative arrangement.

Additionally, always read the terms and conditions before committing to any new offers or promotions.

Finally, review monthly statements for unfamiliar purchases or suspicious activity and report any discrepancies immediately. With the disciplined use of your credit card, you can minimize debt and build a strong financial future.

Key Points

  • Using a credit card responsibly is essential to maintain a healthy credit score.
  • When making purchases with a credit card, you are actually taking out a loan and will have to pay it back later.
  • Paying off the balance in full each month and keeping credit utilization low (30% or less of total available credit) are key components of responsible use.
  • Avoiding late payments and fees is important; contact the issuer immediately if unable to make the minimum payment.
  • Read the terms and conditions before committing to any new offers or promotions.
  • Review monthly statements for unfamiliar purchases or suspicious activity and report any discrepancies right away.
  • With disciplined use of credit cards, minimize debt and build a strong financial future.

6. Choosing the Wrong Type of Credit Card

Having too many credit cards can be a dangerous trap for college students. The CARD Act of 2009 prohibits credit card companies from aggressively marketing to college students. However, unfortunately, many still succumb to the tempting offers of multiple credit cards.

Having too many open lines of credit can lead to overspending, carrying high-interest balances, and digging yourself into debt. Using only one or two credit cards is the best way to build good spending habits and establish good credit.

This means selecting a card that fits your needs and using it responsibly by paying bills on time and avoiding unnecessary purchases.

Keeping track of your expenses can help you stay within budget while not overspending with your card. It’s also important to understand all fees associated with your card; this includes late payment fees, balance transfer fees, annual fees, etc., as these can add up quickly and leave you in debt if not managed wisely.

Finally, if you find yourself in debt due to irresponsible use of your credit cards, seek help from an accredited financial advisor who can offer advice on managing money effectively while working towards becoming debt-free.

By being mindful of how many lines of credit you have open and managing them responsibly, you will be able to avoid costly mistakes and build a better financial future for yourself.

Key Points

  • Having too many credit cards can be a trap for college students.
  • The CARD Act of 2009 prohibits credit card companies from aggressively marketing to college students.
  • Having too many open lines of credit can lead to overspending, carrying high-interest balances and digging yourself into debt.
  • Using only one or two credit cards is the best way to build good spending habits and establish good credit.
  • Keeping track of expenses can help you stay within budget and avoid overspending.
  • Understand all fees associated with your card, including late payment fees, balance transfer fees, annual fees, etc., as they can add up quickly and leave you in debt if not managed wisely.
  • If in debt due to irresponsible use of credit cards, seek help from an accredited financial advisor.
  • By being mindful of how many lines of credit you have open and managing them responsibly, you can avoid costly mistakes and build a better financial future.

7. The dangers of online credit card scams

College students need to be aware of the dangers of online credit card scams. With the widespread use of credit cards, it is important to understand how they work and how to protect yourself from potential criminals.

A few key steps should always be taken to ensure your safety and security when using your credit card online. First, make sure you only shop on secure websites. Look for signs such as ‘HTTPS’ at the web address’s beginning, indicating that it is a secure site.

Additionally, only use payment methods like PayPal or other legitimate payment services that confirm your identity before releasing any funds.

Never provide any personal information like your social security number or bank details on any website without secure encryption technology.

Another important step is to keep track of all transactions made with your card – both online and offline – as any suspicious activity can be quickly identified this way.

It is also advisable to regularly review your credit card statements, taking note of all charges incurred during each purchase and ensuring they are correct.

Lastly, if your credit card has been stolen or lost, notify the issuer immediately so they can take appropriate action and prevent further fraud from occurring.

Following these simple tips and staying vigilant when using your credit card online can help protect yourself against online credit card scams and protect your financial data from potential criminals.

Key Points

  • College students need to be aware of the dangers of online credit card scams.
  • To ensure safety and security when using a credit card online, it is important only to shop on secure websites, use legitimate payment services, and never provide personal information on unsecured sites.
  • Keep track of all transactions made with the card, online and offline, as suspicious activity can be quickly identified.
  • Regularly review credit card statements, taking note of all charges incurred during each purchase, and ensure they are correct.
  • If the credit card is stolen or lost, notify the issuer immediately so they can take appropriate action and prevent further fraud.
  • Following these tips and staying vigilant when using a credit card online can help protect yourself against online credit card scams and protect your financial data from potential criminals.

8. Building credit for a better financial future

Building credit is essential to establishing a successful and secure financial future, especially for college students. As college is often the first time individuals are responsible for their finances, it is important to build a good credit score before graduating.

Doing so provides access to larger lines of credit, which can be advantageous for making large purchases and investments in the future. A great way to build credit as a college student is by responsibly using and paying off a credit card.

This includes only spending what you can afford and never carrying a balance over from month-to-month.

Paying your bills on time each month also helps establish good credit, as it shows lenders that you are reliable in making payments.

It is also important to remember that building credit takes time – usually at least six months of consistently making timely payments before your score will improve significantly.

It’s also important to keep an eye on your credit report, as errors can hurt your score if they are not corrected promptly.

Finally, when considering new loans or lines of credit, ensure you understand the terms and conditions associated with them before signing any contracts or agreements.

Key Points

  • Building credit is essential to establish a successful and secure financial future, especially for college students.
  • Building a good credit score before graduating allows access to larger lines of credit, which can be beneficial for making large purchases and investments in the future.
  • A great way to build credit as a college student is by using and paying off a credit card responsibly, spending what you can afford, and never carrying a balance from month to month.
  • Paying bills on time each month helps establish good credit and shows lenders that you are reliable in making payments.
  • Building credit takes time and usually takes at least six months of consistently making timely payments before your score will improve significantly.
  • Keep an eye on your credit report, as errors can harm your score if they are not corrected promptly.
  • Understand all terms and conditions associated with new loans or lines of credit before signing any contracts or agreements.

9. Waiting to Notify Your Issuer of a Lost or Stolen Card

Waiting to notify your issuer of a lost or stolen card can have serious consequences. If you wait too long, it may be difficult to recover any financial losses; even if you do, the time and effort it takes to do so can be costly.

Credit card companies sometimes may not allow you to dispute fraudulent charges if they are made after a certain period.

It is important to contact your issuer immediately if you think your card has been lost or stolen. This way, the account can be closed, and any transactions made with the card will not accrue interest or fees.

Furthermore, suppose someone does manage to make purchases with your stolen credit card before it is reported missing. In that case, you may be held liable for those charges.

Therefore, it’s important to act swiftly when dealing with a potential theft situation.

Key Points

  • Waiting to notify your issuer of a lost or stolen card can have serious consequences.
  • Difficult to recover financial losses, and time and effort can be costly.
  • Credit card companies may not allow dispute of fraudulent charges if made after a certain period.
  • Contact the issuer immediately if you think your card has been lost or stolen to close the account and prevent transactions made with the card from accruing interest or fees.
  • You may be liable for charges made with a stolen credit card before it is reported missing.
  • Act swiftly when dealing with a potential theft situation.

Conclusion

In conclusion, college students must be aware of the potential risks associated with credit cards and take proactive steps to prevent them.

With the proper knowledge of how credit cards work, students can choose the type of card that best suits their needs, protect themselves from online scams, and use their cards responsibly to build a better financial future.

Furthermore, it is important to notify your issuer immediately if your card is lost or stolen to minimize the damage.

By using these strategies and learning from mistakes made by others, college students can make smart decisions with their credit cards and avoid costly consequences in the future.


Source and References:

Robb, C. A.. “Financial Knowledge and Credit Card Behavior of College Students.” Journal of Family and Economic Issues 32 (2011): 690-698.

About Author

Dhiraj Jha
Dhiraj Jha
As a personal finance and credit cards expert, I provide valuable insights and advice on budgeting, saving, investing, and debt management. I am also an expert on credit card rewards programs and help readers make informed decisions about which cards are right for them. My goal is to help people improve their financial literacy and make better financial choices.

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