Credit Card Usage Rises Among College Students

Many young adults juggling more cards with more debt than in years past
Student holding credit card

Student loans get a lot of attention, but they aren’t the only kind of debt many college students are dealing with. A new study finds that credit card usage is becoming more prevalent on campus.

Insurance firm AIG sponsored research by education technology company EverFi to get a glimpse into how college students manage their money. They surveyed more than 30,000 college students from more than 440 educational institutions across the country, and found a recent, sharp rise in college students turning to credit cards.

In fact, the use of credit cards among college students is up sharply over the last seven years, with usage on campuses at 46% today, compared to just 28% in 2012. College students are also looking to more than one card to meet their needs, as 45% have two or more credit cards, up from 25% in 2012.

While there’s nothing wrong with using credit cards in and of themselves, the study found that some college students are using their cards in a manner that may come back to haunt them later.

More than a third (36%) of college students have more than $1,000 in credit card debt, up significantly from 25% who had that much credit card debt in 2012. At the same time, only 51% of respondents said they expected to pay off their entire credit card bill in the next year.

Repayment was an issue for a large segment of students, with 22% of respondents saying they’d paid bills late and damaged their credit scores in the process. That percentage may rise moving forward, as only 60% of respondents said they would probably pay their credit card bills on time in the future, down from 85% of respondents who expected to pay their future credit card bills on time in 2012. Among students that are part of Generation Z, an even lower percentage — 47% — expects to pay their credit card bills on time.

With so many college students admitting to paying bills late, it’s not too surprising that money confidence appears to be low for many on campus. In fact, 47% of respondents admitted they don’t feel prepared to manage their money.

Credit cards can be a useful tool if you use them wisely. Not only can you improve your credit score by paying your bills on time, but you may be able to benefit from cash back and other rewards. Many card issuers also have offerings specifically geared toward college students to provide those with no credit history or a thin credit file the opportunity to build credit.

Credit cards can work to your advantage when you pay off the entire balance each month. While paying credit card bills late may not seem like a big deal, doing so can lower your credit score, which will in turn make it more costly for you to borrow money in the future.

Tamara E. Holmes

Tamara E. Holmes is a Washington, DC-based writer who covers personal finance, entrepreneurship and careers.

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