When used responsibly, credit cards are beneficial

As college students learn to embrace their newfound adulthood, they “Discover” the allure of credit. A card offers the world if you “don’t leave home without it.” After all, “it’s everywhere you want to be.”

Professor of finance in the College of Business Larry Woodward said that having no credit is bad credit.

“I generally disagree with some of the Christian counselors out there who say don’t use credit cards at all. I’m adamantly against that because this is 2009, and a credit card is a necessary thing to function in society,” he said.

Responsible credit card holders who pay off their balance on time and don’t spend more than they need to should not run into any problems.

“Having a credit card is one of the fi rst and best ways to start building your credit score. The better your credit score is, the lower the interest rate you’re going to have to pay on a mortgage,” Woodward said.

The most economical way of building a credit score is with cards, not loans. Loans cannot be paid off without paying in interest.

Waiting for a credit card to accrue interest is not good for credit scores either.

“There (are) myths out there that people think they have to use a credit card and pay interest on it to build their credit,” he said.

Chairperson of accounting, economics and finance Paul A. Stock said credit scores are vital for people wanting to purchase a house or buy a car.

“If a person doesn’t have any credit, then the lender … is not going to have anything to base their decision on …. If you have no credit, you’re an absolute question mark,” Stock said.

Students who use credit cards in their parents’ name are not improving their own credit score.

“That really doesn’t help their credit card score.” Stock said.

Accumulating debt from one month to the next not only accrues interest, but it hurts the credit score.

“When you carry any balance over to the next month … that shows that you are charging more than you can afford, and that’ll have a negative effect on your credit score,” Stock said.

Woodward warns students to be careful of teaser rates by predatory lenders who could take advantage of new cardholders.and potentially harm their credit for years.

Credit card companies can charge over 6% annual interest fees. This can raise risks for debt.

Charging an annual fee is another thing to look out for. He suggests trying to get a credit card without an annual charge.

“I don’t pay a fee. There (are) lots of credit cards out there with no fee,” Woodward said.

Stock said store credit cards are good ways to build credit.

“It really depends what their spending habits are. If they … frequently use one store more than any other, then a store credit card is not a bad place to start,” Stock said.

Having two lines of credit can also improve a person’s credit score.

“If you’re going to have more than one, it’s better to have it with a different company. Like if you have a Visa, your second one should be like a Master Card or … a Discover or an American Express,” Stock said.

Junior English major Amanda Sanders is married with four kids and commutes to campus. She said she uses a credit card to improve her credit score, as well as to make purchases when she is low on money.

“Basically, (for) any big purchases they have to look at your credit score …. It always helps to have … a semi good one. So that’s basically why I have credit cards. Even though sometimes they do help at Christmas when you’re short on money,” she said.

Students should have a right estimation of the standard of living for the season of life they are in. Like the commercial says, students should “Chase what matters.”

Woodward said, “I look at it as though you have a specifi c responsibility to manage the money that you’re given, and to make it go as far as possible and to provide for your family the best that you can.”

Author: Evangeline Grace Ciupek

Evangeline Grace Ciupek is currently studying English at the University of Mary Hardin-Baylor, and plans to graduate in May 2011. She joined The Bells staff Spring 2009. She is usually found reading enormous books assigned to her by professors, battling bugs in her parents' garden, playing acoustic guitar, or knitting the lone sock she's been working on since last Thanksgiving. While a career in journalism remains somewhat undesirable to her, Evangeline is grateful for the opportunity to improve her writing skills through involvement on The Bells staff. Her dream career would be that of a starving artist.

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