Students seek to gain a different kind of credit

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Making the transition from high school to college life comes along with the need to make important decisions.

One of those decisions will be the freedom to get a credit card, which can be great or destructive depending on the type of card obtained and how it is maintained.

It can also be the time where freedom to spend can lead to debt.

As expenses continue to increase, more students turn to credit cards for extra cash.

College students often encounter credit card offers on campus and in their everyday activities.

Offers can come in the mail, campus marketing or even a quick trip to the mall.

In most states, students in college can apply for and receive cards without their parents’ consent.

“If you are already paying bills because you are old enough, build your own credit by putting things in your own name,” said Andrea Nuño, psychology major and banker at Wells Fargo.

Nuño has worked as a banker for two years and has gained knowledge about how to manage her credit and help out students that want to start theirs.

In most cases, however, college students are barely starting to build their credit.

“There is no mad rush to build credit… if you can handle it, a credit card is OK,” said Jeff Parsons, a personal finance professor at Cal State Fullerton.

Students interested in credit, however, should consider the different ways to prevent debt.

Paying off a credit card balance in full each month is the most efficient way to maintain a good credit score.

The incentive to this tactic is that credit card users avoid paying the high interest rates that starter credit cards usually have.

Manuel Marquez, an information systems and decision sciences major, said he uses his credit card for gas and pays it off when he receives his monthly statements.

Students that do not make full payments will have disadvantages.

Making minimum payments on credit cards makes it easy to max out cards and create debt.

Keeping an outstanding balance less than 30 percent on the credit line makes it easy to avoid this problem.

“A lot of students do not realize when they max out a card their credit score is dropping,” Parsons said.

Having a secured card is another good way to jumpstart credit scores and not overspend.

Nuño said students with extra cash can invest it in a secured card at banks.

The amount users put down on their secured card is their credit limit.

These type of cards are considered to be pre-paid since a collateral down payment is required.

Secured cards still allow for a credit history to build and eventually lead to credit lines where cash from the secured card is reimbursed.

Parsons said there are two different types of people in the credit world.

Convenience users make it a point to make full payments and have the opportunity to acquire discounts or rewards.

Only 17 percent of students fall under this statistic, Parsons said.

A majority, 60 percent, are called credit users that do not pay off statements in full and suffer from high interest on outstanding balances.

Parsons said students should aim to be a convenience credit card user.

After getting one credit card, other providers flood mailboxes and emails with more credit offers.

Marquez said he noticed this after getting his first card, but has not signed up for more credit cards.

As a student and banker, Nuño recommends that students limit their spending by not buying more than they can afford.

Parsons agrees and suggests that if possible, younger students only use their card in case of an emergency.

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