We’ve reached the time of year when college students are beginning to return to campus. Incoming seniors are gathering for one last hurrah. Recent high-school graduates are preparing for the next chapter of their lives. The slow realization that summer is nearly over and the education grind is about to start is setting in across the country.
Alongside that dreadful moment of clarity comes financial contemplation. This time of year includes a barrage of emails, letters, texts, and the occasional messenger pigeon from credit-card companies imploring students to apply for their card. The companies assure the oft-broke student that their card comes with a plethora of benefits. They promise transparency. They make the cards seem sleek and cool.
Most important, these companies tell the student that beginning to build their credit score now will pay dividends in the future, especially when it comes time to buy a house or car, or make some other debt-intensive purchase. The message promulgated by the credit-card companies is reinforced by our extensive culture of debt. In an age of seemingly endless plastic money, it’s hard not to fall for the myth that credit cards are must-haves. But it is just a myth. All the things one “needs” a credit card to do can be done without one. Some examples:
- Home-buying
The idea that you need to build your credit is more often than not connected to the dream of buying a home. A credit score isn’t needed to qualify for a mortgage, though. The underwriting process that banks use to determine a person’s credit worthiness can be done manually. Rather than using a person’s credit score, the bank examines their payment history and income to determine how trustworthy the person is. No pre-mortgage debt needed.
- Renting a car
Once upon a time a car rental would have been impossible without a credit card, but many companies today will accept a debit card as well. So long as the traveler checks ahead of time, they should be able to find a place that takes whichever debit card they carry.
- Protecting against fraudulent charges
Credit cards, being an extension of someone else’s credit, do come with enhanced fraud protections compared to debit cards (or cash). So long as the fraud is reported quickly, though, debit cards are protected as well. Of course, this requires the person holding the card to be cognizant of their bank account, but asking someone to pay attention to their money shouldn’t be a tall ask.
It is hard to be college-age and not get caught up in the idea that credit cards are as needed for life as air or water. I would know. But before my age cohorts impulsively sign those papers they receive in the mail, it’s worth remembering that those incredibly stressful pieces of plastic are a choice, not a requirement. And as I wrote in June:
American financial culture needs a change, and that change begins and ends with private individuals willing to look the dominant culture in the eye and say no. It begins with people who, to borrow a phrase, are willing to live like no one else so they can later live — and hopefully give — like no one else.