The other day I was asked if entering college students should get a credit card when they head off to school. My answer is that credit cards and college undergraduates don’t mix. (There are exceptions to that general rule, of course. A credit card is for students attending college in another country). Here’s why.

For most young adults, the college years are the first time they’re learning to live with a budget they control. Learning how to set up a budget — with parental guidance and input — and following through on the financial blueprint is key to managing money in college. A debit card, essentially an electronic checkbook, is the financial tool that best fits with the idea of undergraduates learning about budgets.

College students hopefully figure out how to steer clear of ending a semester with only enough left in the bank account for Ramen noodles. Students shouldn’t take on credit card debt to close the gap. Most students are debt-burdened enough when they graduate. For example, from 2004 to 2014 there was a 92 percent increase in the number of student borrowers and a 74 percent hike in the average student loan balance. That said, there is financial flexibility built into the federal student loan system. They can always postpone or reduce payments. Credit card debt is inflexible debt, even if only paying the minimum.

I’ve never found the argument particularly persuasive that undergraduates need to build up a credit history. I understand why financial services companies promote the idea. But undergraduates have a lifetime of work ahead of them to build up a credit history. The risk of falling into the credit card debt trap is simply too great to accept. (It is sensible for seniors in college to get a credit card since it’s easy to qualify and they will be earning an income soon.)

On the other hand, it’s often underestimated how critical teaching your college student the basics of budgeting is for their financial future. For parents, heading off to college is a good time to have concrete discussions about money with your student. Both parents and students will get real-world feedback on money decisions made during the school year. The budget should be relatively simple, including room, board, fees, books and entertainment. Online budget programs like are useful. So are the programs offered by most banks and credit unions.

Most importantly, keep the money conversation going. College is a good time to gain knowledge into all kinds of human endeavors, including the basics of managing money.


Christopher Farrell is senior economics contributor, “Marketplace,” economics commentator, Minnesota Public Radio.