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The Case for College Students to Have Credit Cards

Erin Lowry

Incoming freshmen receive dozens of warnings before stepping foot onto their college campus for the first time:

Mom and dad caution them to not get carried away with extra curricular activities and instead focus on their grades.

Older siblings kindly suggest avoiding any beverage with the word "jungle" in the name.

Financial experts yell, scream and throw their arms in the air about avoiding credit cards.

While jungle juice should be avoided, there is actually a case for college students to sign up for a credit card. Here are three reasons why a credit card will set them up for a healthy financial future.

1. Credit cards help establish credit history.

A credit card is a simple tool to both establish credit history and begin working toward a good credit score.

Student loans help establish credit and can positively impact a credit score. However, part of the FICO scoring model depends on diversity of credit. And responsible use of a credit card -- making on-time payments, for example -- is a simple way to increase a credit score.

Credit cards also offer students without loans the opportunity to establish their credit and spend four years proving they are responsible borrowers before graduation. Lest we forget, recent grads who don't want to return to their parents' basement will need a credit score to get their own apartment or house.

Parents concerned their child can't handle the credit limit associated with a credit card should consider having their child apply for a secured card to prove their responsibility before upgrading to the real McCoy.

2. Students don't always have cash.

Certain financial experts advise using cash to avoid debt because mindlessly swiping plastic doesn't register as spending money. Except cash is quickly becoming a relic of the past, and college students aren't likely to be dealing with paper currency.

Plenty of young men and women are already used to debit cards and use apps like PayPal or Venmo to pay back a friend instead of cutting a check or getting cash out at the ATM. If students don't have quick access to an ATM on campus, a credit card will save them if they're in a bind.

3. Online purchases shouldn't be made with a debit card.

Who buys textbooks at the university bookstore anymore? College students today were reared making purchases on Amazon and buying their clothes online. They don't even need to pick up the phone to order food.

Unfortunately, the rise of technology also led to an increase in fraud and identity theft.

Using a debit card for online purchases makes an individual far more vulnerable than using a credit card. If a thief gets a hold of a debit card, he or she can effectively drain a bank account instead of just racking up fraudulent charges on a credit card. Most banks or credit card companies do not hold individuals liable for fraudulent purchases on credit cards. According to USA.gov, consumers are only liable for $50 if the loss is reported within two business days, but the charge could go up to $500 between day three and 60.

The use of a credit card for online shopping, buying gas or making purchases at other places known for skimmers, could help a college student avoid the headache of a mysterious drain on his or her bank account.

Who shouldn't get a credit card?

College students who can't even remember their homework assignments aren't ideal credit card users. Young men and women who describe themselves as impulsive, spenders or forgetful may need to wait before acquiring a potential debt tool.

To avoid credit card debt and protect their credit scores, young adults need to be vigilant about paying their bills on time and in full. Credit card users should understand the ramifications of carrying a balance and paying interest on their debt. A credit card shouldn't be used any differently than a debit card, except you have to pay your bill at the end of the month instead of automatically seeing the money get deducted from your account.

The decision whether or not to apply for a credit card should be made based on self-awareness and fiscal responsibility. It takes a basic level of financial education to understand how credit cards work, the interest rates that get charged on debt and how easy it is to get trapped in a cycle of throwing money toward interest. But for responsible, independent college students, a credit card can help establish their financial footing.

Erin Lowry writes about personal finance and manages social media for MagnifyMoney.com, a site dedicated to helping consumers save money by finding simple, transparent financial products. She is also the founder of the personal finance blog Broke Millennial.

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