Credit Cards 101: Helping College Students Build Credit and Avoid Debt

American college students are swimming in a sea of credit card debt. Despite a 2009 law that tightened restrictions on credit card companies who were doling out credit cards like candy to every college student on campus, a recent study shows that 70 percent of college students have credit cards. More than 90 percent of those students carry a monthly balance. Between 2004 and 2009, the average credit card debt for students jumped from $946 to more than $4,100.

Young people need to be smart about credit, say personal financial planning experts at the Pennsylvania Institute of Certified Public Accountants (PICPA). The on-campus credit card offers are tempting, and it may seem like free money, but misuse of the cards can spell disaster. Used correctly, credit cards can help build a solid credit report. Used incorrectly, credit cards can leave students with a financial burden that lasts long after graduation.

Top 10 Tips for Students
  1. Read the fine print. Get out your magnifying glass and read all of the little words at the bottom of the credit card application before you sign anything.
  2. Understand the APR. When you read the fine print, you’ll see the card’s APR (annual percent rate of interest) that you’ll be charged on all or a portion of the credit card balance if the full amount isn't paid on or before the due date. You want the lowest interest rate you can find just in case you ever need to carry a balance and pay that interest on your purchases. The average rate hovers just under 15 percent, but there may be lower offers. Shop around.
  3. Beware of the fees. Some credit card companies charge a fee for simply having their credit card in your wallet. Some have a fee of $50, $75, or even more per year. Again, shop around for the best deal. Rewards cards offering airline miles or cash back can be useful, but these cards may also have more expensive yearly fees. Make sure the reward is worth what you spend.
  4. Don’t carry a balance. Pay your balance off when your statement arrives each month. Paying the minimum each month can be a recipe for financial disaster. If you carry over a monthly balance, you are looking for trouble.
  5. Know your limits. A higher credit limit may help your credit score over time, but if you are concerned about your spending habits, request a lower limit for now. You can request to have it raised in the future.
  6. Understand the grace period. The Credit CARD Act of 2009 requires credit card issuers to offer at least a 21-day grace period, which is the time during which you are allowed to pay your credit card bill without having to pay interest. The grace period usually applies only to new purchases. Most credit cards do not give a grace period for cash advances and balance transfers.
  7. Pay on time. Get your payment in by the due date or you’ll be slapped with late fees on top of interest charges.
  8. Don’t get carried away. Once you’re approved for a new credit card, offers will begin to roll in for even more credit cards. These cards may have low introductory interest rates and fees that skyrocket down the road. Don’t be tempted. Having too many credit cards can adversely affect your credit rating.
  9. Set limits. Decide how much you can afford to pay each month and stick to that as your spending budget. Plan to pay your credit card balance in full each month.
  10. Don’t let debt pile up. If you find yourself getting in over your head and your monthly balance growing instead of shrinking, get it under control right away. Develop a plan to pay the balance off, and stop spending until you do.
A CPA Can Help

Choosing and using a credit card is something parents and students should sit down and discuss. Work together to choose a card, set spending limits, and understand the importance of good credit. The decisions college students make now will have a profound effect on their financial success far into the future.

Your CPA can help. As a trusted, independent financial advisor, a CPA can understand different options available to you. To find a CPA in Pennsylvania by location or area of expertise, visit

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