What Do College Students Know About Credit Cards?
This month, millions of newly-graduated students are setting off to college. For these freshmen, this may be the first time they’ve left home and will be responsible for making their own day to day decisions — including managing their money. On that note, the personal finance site WalletHub recently released a survey showing what college students do and, more interesting, don’t know about credit cards.
Headlining the study, WalletHub found that one in ten college students mistakenly believe that credit cards are akin to free money. While it’s impossible to say for sure, these young adults are likely not referring to credit card rewards such as cash back as the “free money.” Instead it would seem they are not aware that they’re responsible for paying off their card balances and covering any purchases they make (plus interest).
Sadly the lack of financial responsibility doesn’t stop there. The survey also found that 14% of students say they’d “rather miss a payment than a party.” Additionally 30% of respondents said they’d grade their financial knowledge at a C or worse. However one bright spot in the study was that more than one-third of students say they at least help their parents pay their credit card bills.
Commenting on the survey’s findings, WalletHub CEO Odysseas Papadimitriou attributed some the results to a lack of financial education, saying, “Unfortunately, I am not surprised that 1 in 10 students think credit cards are free money, considering the current state of financial literacy education. Schools aren’t teaching money management, at least not nearly enough, and many parents are actually more comfortable talking about sex than money.” Despite that alarming stat, Papadimitriou states that it is important for students to learn how to use credit cards and build their credit. To accomplish this, Papadimitriou recommends adding students as authorized users, explaining, “Making your child an authorized user on a credit card account is a good way to introduce them to credit before they can qualify for a student credit card. Most issuers don’t have an age requirement but do allow you to set a custom spending limit for authorized users.” He concluded by noting, “You’ll have full visibility of their transactions, and they’ll start building credit history.”
While there’s little doubt that many American students are in need of financial literacy training, ultimately this single study doesn’t exactly spell disaster for the generation coming of age. That’s in part because WalletHub’s survey only sampled around 200 students, which is rather small. Nevertheless this serves as another reminder that parents should teach their children about good financial habits before they’re ready to set off on their own.