Everyone is telling you that you have to have a credit card or two—especially the credit card companies. Here are some facts to help you make an informed decision.

Two Good Reasons to Get a Credit Card

  1. A credit card is helpful in an emergency (for example, a car breakdown).
  2. Having a credit card helps you establish a good credit history. That's provided you pay your bills on time. A good credit history is important when you apply for a job (some employers check credit scores of job applicants), a car loan, or a mortgage. And a good score can help you get cheaper car and home insurance.

Two Poor Reasons to Use a Credit Card

  1. Reward points. Trying to earn reward points may tempt you to overuse a card just to earn points for stuff you really don’t need. Plus, you have to use the card a lot to make this benefit worthwhile.
  2. Instant gratification. You can have stuff now and pay for it later when you graduate and get a high-paying job. Assuming you do get a high-paying job, there will be plenty of other things you may need to buy, including business attire, a better car, etc.

Four Good Reasons Not to Get a Credit Card

  1. High interest rates. If your card’s interest rate is 21% and you only make the minimum payments, that $500 laptop you can’t live without today will end up costing you about $757 by the time you graduate and start earning the big bucks. When you don’t pay off your balance at the end of each month, you pay only interest and never make a dent in the principal.
  2. Temptation. It’s too easy to get a card. Credit card companies make it easy to get one with a high limit, and they don’t explain the interest rate, late charges, etc. It’s too easy to make purchases with a card, so you end up buying things you can’t afford because you can charge them and pay later.
  3. Immaturity. Some teens (and lots of adults, too) aren’t mature enough to handle the temptations of a credit card.
  4. Stats. Teenagers’ statistics are against you. One survey (from student loan provider Nellie Mae) shows that 78 % of college students have credit cards with an average balance of $3,200; one in ten students is more than $7,800 in debt. To put that information in perspective, if you paid $200 a month on a credit card with a balance of $3,200 at an interest rate of 21%, you would pay $495.58 in interest over a one-year period. In other words, your original $3,200 balance just became $3,695.58.


Sources:about.com
interest.com