Adulting can be a frightening concept, especially when it comes to balancing finances independently. While it might seem like another responsibility to worry about, being a credit card holder offers rewards for both purchasing necessities and weekend splurges.
About 56 percent of college students are credit card holders and for students ages 18 to 24, establishing credit is the No. 1 reason for opening a credit card account, according to the 2016 Sallie Mae report.
“My dad’s advice was to open a credit card and to start building a credit score and within a couple years, hopefully, I can buy myself a new house (or) a new car,” said 24-year-old Cal State Fullerton student Yesenia Higareda.
A credit score doesn’t necessarily help or prevent a person from buying or renting a property, but it does affect the interest rates lenders may charge on a loan used to pay for it.
According to the 2016 Sallie Mae report, a majority of students manage their credit cards responsibly. About 77 percent pay bills on time and 60 percent report never exceeding their immediate funds.
Still, students often worry about missing payments.
“I’d say it’s a general concern for people … Or if they add on a recurring payment that happens every month or every year and they forget about that, I think that can be scary if you set that up and don’t remember,” said business management major Darren Benton.
Some cards won’t charge a late fee for the first missed payment but in most cases, a missing or late payment will cost the cardholder.
“I have to remember to pay it every month or I’ll get charged interest,” said 21-year-old CSUF fourth year Petra Palomera. “If I have like $400 left to pay and I can only pay $300, they’ll charge me $6 or $7 for that month.”
Ease of access is another reason students use credit cards over cash or debit cards.
Benton said credit cards are more flexible. It gives him the opportunity to purchase items even when he doesn’t have the money readily available and he can pay it back when he does.
Many credit cards are also eligible for a cash-back reward system, with percentages varying between card types and banks.
“You get three percent cash back for gas, one percent cash back for food … Also (the credit card) have features like if you spend a certain amount at a certain restaurant or a store, you get like 10 percent cash back,” Palomera said.
Using a credit card also protects a person’s money. Stolen cash is irreplaceable, but a credit card can be reported lost or stolen and the holder will not be responsible for paying fraudulent charges. This often includes when a charge is made but the product is never delivered.
Many banks offer credit cards specifically for students.
Discover offers students five percent cash back on purchases for categories that change every few months (such as on restaurants) and one percent on all other purchases. It also rewards students $20 for each school year if they have at least a 3.0 GPA. At the end of the first year of owning the card, it pays additional cash-back matching the total amount earned for the entire year.
Through Discover Deals, customers can find special discounts and coupons, while earning extra cash back by shopping certain online stores through the Discover website. Discover also has purchase and price protection that includes extended warranties on qualifying items and refunds for the difference in price of an item already purchased at a higher cost.
The Bank of America student card pays three percent cash back on gas, two percent for grocery store purchases and one percent cash back everywhere else. It also rewards a 10 percent customer bonus for transferring cash back earnings into a Bank of America checking or savings account.
With a Wells Fargo student card, cardholders can earn three percent cash back for each dollar spent on gas, grocery and drugstore purchases for the first six months and one percent for each dollar spent on all other purchases. Like Discover, Wells Fargo offers additional opportunities for earning cash back when purchases are made through their “Earn More Mall,” which provides special links to online stores.
Chase does not offer a student-specific card but its Freedom card offers a $150 bonus after spending $500 within the first three months of opening the card account. Cardholders can earn five percent cash back for purchases in rotating categories and one percent on all others.
Due to the Fair Credit Billing Act, all purchases made with a credit card are protected from charges if a product is received damaged or defective.
Many student cards do not charge an annual fee to open a credit card with them.
Although the pressure of adding an extra monthly bill can seem petrifying, many card providers make it uncomplicated. The transition into full blown adulthood is eased a bit with opportunities to earn while spending.