By Tyler Blount
Sana Chaudhry, a sophomore at the University of Georgia, has her own credit card, but said she uses it only for weekly expenses such as coffee and gas.
“I don’t use it much, just to fill up my gas and maybe for coffee once or twice a week,” said the 19-year-old psychology major.
Chaudhry said she learned how to use her credit card from her father.
“I’m using less than 30% of the maximum that you’re given for at least the first bit that you’re given,” she said.
Jill Hopkins, an adviser in the department of finance at UGA, said parents are a major influence in the decision of college students signing up for credit cards.
“Some parents are more financially astute and recognize that building a credit score is very important for future opportunities, such as buying a car and purchasing a house,” Hopkins said. “They encourage their children to get a credit card to build that credit score.”
The minimum age to be issued a credit card for most card issuers is 18 years old, and Hopkins said the earlier college students start building their credit history, the more financially successful they can be.
Sallie Mae, a financial company offering education loans and planning tools, found in a 2019 study that 57% of college students carry credit cards. According to Sallie Mae’s website, a major reason college students sign up for credit cards is a recommendation from their parents or guardians. Sallie Mae reported that 30% of college students had parents or guardians who had recommended a credit card.
Hopkins, who previously worked for 33 years in commercial lending, risk management, and credit card banking at Wachovia Bank, said banks use sophisticated models to calculate credit scores.
“The purpose of a credit score is to predict who is going to perform well and be able to manage their debt, and who is not going to be,” Hopkins said.
For college students, knowing and understanding credit card terms such as credit score, FICO score (Fair Isaac Corporation), annual percentage rate (APR), and annual fees can clarify how to use a credit card, how to choose a credit card, and how to maintain a good credit score.
“Making sure to read everything before you sign because a lot of them have hidden fees, interests,” Chaudhry said. “Make sure that you’re doing your research, really reading into things rather than just trying to jump at the first one you see and find what works best for you.”
Three credit card bureaus calculate credit scores: Experian, Equifax, and TransUnion. These three bureaus assign credit scores based on five elements such as payment history, amounts owed, lengths of credit history, new credit, and credit mix. According to the Equifax website, credit scores range from 300-850 with the scale indicating poor, fair, good, very good, and exceptional credit.
Hopkins said building a credit card profile in college also allows students to look into the future when purchasing a car or a first house. Despite the benefits of having a credit card, college students need to know how credit cards work in the world before signing up for one to practice safe credit card use.
“It’s all about flexibility and giving yourself the ability to do what you want when you need to,” Hopkins said.
Tyler Blount is a journalism student at the University of Georgia
