Weighing the Possibilities of Paying for College with Credit Cards
Credit cards make bill paying deceptively simple. With just one swipe of a card, students can purchase all sorts of things for school, even if they don’t have any money in their bank accounts at the moment. Sometimes that’s help that students really need. But sometimes students toy with the idea of paying for their entire college experience with a credit card. Those who do so could be taking huge chances with their financial health, and they might even ruin their financial futures.
At one point, credit cards were a routine part of the college experience. Credit card companies placed slick brochures and application forms in public areas, and many students found card offers in the mailbox each morning. Much of that changed in 2009, when the Credit Card Responsibility and Disclosure Act was signed by President Obama. At that point, students younger than 21 were required to have a cosigner or a source of independent income in order to get a card, and companies had to adhere to strict rules when marketing to young people.With these rules in place, credit card use among college students has declined. In 2010, for example, 42 percent of college students used credit cards, but in 2012, only 35 percent did, according to research cited by the Washington Times. It’s just not something all students have access to anymore.
But college students who do have access to a credit card account might find it tempting to use plastic to pay for:
They’ve been approved for the debt, these students reason, and it’s a simple way to cover their costs. Students might think they’re making smart choices, but in reality, using a card for a debt like this is extremely unwise.
The Credit Card Trap
Credit cards are ideal for small, unexpected purchases that a student must make right now and can easily afford in a month or two. There are no forms to fill out in order to take out these mini-loans, and paying back the balance on time can help a student to demonstrate a form of financial responsibility, and that might help a student to get mortgages and car loans from banks in the future. The student seems responsible, and there’s a credit history to check. All of this could be quite beneficial.
But credit cards can be amazingly expensive for long-term debts. According to Bankrate, the average fixed credit card rate is 13.2 percent, which is more than double the interest rate seen in federal forms of student loans. It would be wiser for students to explore their student loan options, so they can get a better deal and avoid some of the more egregious loans that could ruin their financial future.
If you’d like to explore your loan options, we can help. Our “Find a Student Loan” page will help you to explore the large number of loans that are available to you from private lenders, and you can use this tool to both compare loans and apply for the products you like. Just click to get started.