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NAAHP Blog

2017 Survey: Nearly Half of Students Aren’t Taught About Credit Cards Before Getting One

10.20.2017

Finance

Student credit cards are targeted to young people who may never have owned a credit card before and who may have little or no established credit history of their own. Income requirements are often low, and these student cards usually come with low credit limits for new cardholders.

Student cards also tend to have limited credit score requirements, so credit card issuing banks offset uncertainties about creditworthiness by extending lower credit limits and charging higher interest rates. Students who sign up for a credit card should be conservative with card usage and limit their usage to avoid falling into debt.

[Check out the Best Student Credit Cards of 2017.]

2017 Survey: Nearly Half of Students Aren’t Taught About Credit Cards Before Getting OneU.S. News ran a nationwide survey of 1,427 college students who own credit cards, asking them about their credit card habits and knowledge. The results conveyed that many students don’t have adequate knowledge of credit cards and aren’t currently using best practices needed to build a strong financial foundation.

Forty-four percent of respondents weren’t educated by their parents or teachers on important topics related to credit usage and management before getting a credit card. Education is critical, says Bill Hardekopf, CEO of LowCards.com, because while credit cards can be a great financial tool, they can also be a financial burden. Credit cards come with all sorts of protections and benefits including not having to carry cash, a rewards program, and an accounting system to know how you spent your money, along with the fact that you’re building your credit history. But if you don’t pay the balance off there is a stiff penalty in the form of interest.

 

(conducted using Google Surveys May 2017)

More than one-third of respondents either don’t have an idea of what their credit score is or don’t know what a credit score is. Hardekopf advises, “Your credit score is one of the most important things you have as an adult … and you start building it right from the get-go. Similarly, you can start messing it up right from the get-go.” If that happens, it takes a long time to overcome problems with your credit score.

(conducted using Google Surveys May 2017)

Moreover, 46 percent either don’t know what their card’s annual percentage rate is or don’t know what an APR is at all.

(conducted using Google Surveys May 2017)

However, nearly two-thirds of student respondents (64 percent) reported that they carried a balance on their card at least once in the last year, with 31 percent reporting that they carried a balance six or more times in the last year. Once you start carrying a balance, it can be very difficult to get out of debt because of compound interest, and it can hurt your credit score if you are utilizing a large portion of your available credit.

(conducted using Google Surveys May 2017)

Nearly half of respondents (45 percent) said they have relied on a credit card at least once in the last year to afford life essentials, but more than half reported that they struggle with aspects of credit card and credit management such as overspending, budgeting and paying bills on time.

(conducted using Google Surveys May 2017)

The results of this survey underscore the need for better credit education for young adults. Credit cards can be a great tool to start building a credit history while making regular purchases, but if not used effectively, they can make life after college more difficult and expensive. Hardekopf warns students that credit cards are “only supposed to stop you from carrying cash – you still have to pay it back in full every month, and if you can’t, then you need to stop using it.”

Survey methodology:

  • U.S. News ran a nationwide survey through Google Surveys in May 2017.
  • The sample size was the general American population and the survey was configured to be representative of this sample.
  • The survey polled 1,256 students who own credit cards.
  • The survey asked nine questions relating to the credit habits and knowledge of students.
  • All winning answers were statistically significant at the 95 percent confidence level.
  • See the full survey data, questions and results.
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