Maintaining a Clean Credit Transcript
Once they’ve gotten their first card, the student needs to know some of the basics, as well as the fine-print rules, of credit-card responsibilities. You’d be surprised (or not) by how little young consumers know about the rudimentary mechanics of how credit cards work.
Best to start with consequences, like what happens if they’re late or miss a payment, triggering high fees, higher interest rates, and a ding to their still-delicate credit score and report. In fact, a late payment can stay on their credit report for up to seven years1, leaving a mark well past graduation—much like a failed class during freshman year.
And then there’s the cautionary tale of credit card debt, which can take years to pay off. According to a U.S. News & World Report survey, 42% of U.S. college students say they have credit card debt with 28% saying their credit card debt exceeds $2,000.2 Most students would just shrug that off, but that’s because no one has told them that a $2,000 credit card balance with a typical annual rate of 20% (according to Bankrate) and a monthly minimum payment of $100 would take more than two years to pay off.3 The interest alone on this debt would be $453 by the end of those two years. Larger amounts at different payment rates and durations can yield even more sobering costs. (Online credit card interest calculators can help quantify the long-lasting effects of carrying even a little card debt.)