Here's Why I Opened My First Credit Card Before I Went to College
If used responsibly, opening a credit card before going to college can have many advantages.
Personal finance is a subject that typically isn’t taught in school, but it probably should be. Many college students and adults have no idea how to manage their money. I was lucky enough to have parents who drilled financial responsibility into me early in life. They helped me learn from their own financial mistakes so that I could be better prepared. Thanks to their help, I realized that it would be beneficial for me to start building my credit as soon as possible. So, I got my first credit card before I went off to college.
This can be a smart financial decision for young adults. If used correctly and responsibly, having a credit card as a college student can be very beneficial. Here are some of the reasons why it’s a smart idea to open a credit card account sooner rather than later.
Credit age is an important factor
Having a credit card early in life can help you start working on your credit age. Credit history is a record of a person’s ability to manage their debt. As time goes on and you have more credit activity, the longer your credit age will be. Your credit history length, which includes your credit age, makes up 15% of your credit score. The longer you keep your credit accounts open, the better off you’ll be. Opening up a credit card when you’re 18 or 19 can pay off down the road when you need to take out a loan because you'll have a long history of being a responsible borrower.
Credit utilization is also part of your score
Another factor that goes into your credit score is your credit utilization, or how much of your available credit balance you’re using each month. Your credit utilization makes up 30% of your credit score. When you’re a college student, your bills will likely be small. Getting a credit card early in life and keeping your balances very low will help you have good credit utilization, which in turn can improve your credit score.
Start improving your credit score early in life
Your credit score is a big part of your life. When you go to rent an apartment, buy a car, take out school loans, or eventually buy a home, your credit score will be scrutinized. It takes time to grow your score and your credit, and your score will be lower if you don’t have any loans or credit cards to show in your credit history. That’s why it’s smart to get a credit card earlier in life. Having a credit card, paying it off regularly, and keeping a low balance will allow you to raise your score over time.
It teaches financial responsibility and money management skills
Opening a credit card as a college student or young adult can also teach financial responsibility and money management skills. Start by using your card for small purchase amounts. Consider charging weekly gas purchases or Friday night pizza. Make sure that you pay your credit card in full every month. If you’re bad at remembering, you can set up automatic payments, or you can mark payment dates in your planner.
Learning how to responsibly manage your money early in life can help you make better financial choices in the future. Plus, it can help you avoid accumulating debt, which can be challenging to get out of as more financial responsibilities come your way.
Be prepared for emergencies
Emergencies happen, and they tend to happen when they’re least expected. Having a credit card is an excellent way to be prepared in the event of a financial emergency. Make sure to know and understand your credit limit and keep your balance low so that you’re able to charge your card when you need it.
These are some of the reasons I decided to open my first credit card before going to college. I’m in my 30s now, and I’m glad that I made that financial decision because it’s since helped me take advantage of great financial opportunities. I still have that first credit card open, and I charge a small amount on it every month. If you’re a young adult, you may want to think about opening a credit card account so that you can benefit now and in the future.
Alert: highest cash back card we've seen now has 0% intro APR until 2025
If you're using the wrong credit or debit card, it could be costing you serious money. Our experts love this top pick, which features a 0% intro APR for 15 months, an insane cash back rate of up to 5%, and all somehow for no annual fee.
In fact, this card is so good that our experts even use it personally. Click here to read our full review for free and apply in just 2 minutes.
Our Research Expert
We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.
The Ascent is a Motley Fool service that rates and reviews essential products for your everyday money matters.
Copyright © 2018 - 2023 The Ascent. All rights reserved.