Freelance spending with a credit card: College Edition

By Chelsi Peter

Sign up for a credit card they say, we have the best interest rates and zero fees for a year they say. That’s exactly how credit card companies’ prey on college students at their most vulnerable state. Many students still trying to keep up with the mountains of loan payments and the eeriness of their debt crowding up. Any chance to be able to purchase an item without having to essentially pay “right away” seems desirable.

Though, with no discipline and true understanding of how credit cards work, this leads to students with bad credit at the end of their four years at college. In the end, their chances of banks accepting their request to purchase a new car, take out a large loan, or be appointed a job in a high-ranking position have all lessened.

Bad credit essentially determines whether you’ll qualify for a loan or credit card – and whether you’ll pay high interests if you are approved. What students don’t realize is that many employers consider any future employee’s credit report. When you apply for a job, employers may check your credit report if you provide them written authorization; though, companies won’t have access to your credit score. Credit reports are used by employers to examine an applicant’s money management skills and accountability/responsibilities within their job. It isn’t impossible for students to get a job with poor credit, meanwhile some companies will consider your credit history more severely for certain job positions.

College students are a credit card company’s prime suspect. College Finance did a survey of 635 college students with credit cards and 115 college students without credit cards and found that 64% of college students have some form of credit card debt. Credit card companies typically pay universities to partner with the school and gain the ability to market their credit cards to the students on campus. The whole catch is credit card companies pay to offer credit cards to students because they believe the interest and fees will make up for it.

A lesson many students never learn until later is, to not sign up for the first credit card that comes their way. As college students we get so intrigued of the idea of signing up for a store credit card at the mall to get 15% off that one purchase, many students lack the proper knowledge that one too many credit cards lower your credit score and raises the interest you may end up paying. The concept of being able to swipe the card and “pay later” is what’s part of the dangerous narrative many students fall into when it comes to credit card debt.

In my case, I was taught to use my credit card for items like, groceries, food, gas, and emergencies. The purpose of my credit card is to build credit, so I won’t have any trouble renting an apartment or taking out a loan for more education. I’ve been practicing proper discipline and responsibility, as a result I’ve seen my FICO score increase, thanks to my good spending and money habits.

It is extremely important to be aware and understand financial literacy and realize that as college students we can only depend on our parents for so long. While there’s been times where I haven’t made the smartest financial move, I’ve quickly come to the realization that with freelance spending and sprees comes consequences.

Many students don’t pay attention to the fact that you once you’ve hit your credit card limit, you’ve reached your spending limit and need to pay the remaining balance off. To college students the temptation to spend more with a credit card will always be there. Colleges need to better educate students on the long-term negative effects that come with misusing a credit card and damaging their credit score in the long run. Many adults in my life have expressed to me, once you mess up your credit score, it takes twice as hard to get even close to where you once were. Despite the wide-spread use of credit cards from students to adults, many do not fully understand the concept of interest rates and steady income is.

The introduction of credit cards in the economy has greatly influenced the way consumers purchase goods and services. The New York Fed’s Consumer Credit Panel’s Quarterly Report in 2020 showed that credit cards are attractive among younger borrowers, with more than half of individuals in their 20s expressed having a credit card on their credit report.

From the early 1990s credits cards have been the most used type of consumer credit. Younger consumers, who are more likely to have credit cards and student loans as their principal sources of debt have a bigger challenge repaying their loans on time compared to older consumers.

Online shopping, dining, travel purchases, groceries and gas are among the most popular places college students frequently shop with their credit cards. In my opinion whether it’s a purchase for leisure or academics the concept of maxing out their credit cards remains a huge issue within the college student demographic. The typical American college student faces severe financial difficulties, whether that be paying for student loans, textbooks, or food for the week.

An important practice us as students need to be aware of is every action/step taken now has its affects in the future. As independent individuals we need to understand why it’s important to have a credit card, but also remain aware of how damaging it can torment any small process to living outside of college.

Peter is a junior at the University of Missouri School of Journalism.

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