I went to college in the 1990’s, which turned out to be the golden age of the student credit card business. While a 25 year old with no credit history, no debts and a steady job couldn’t qualify for a credit card on their own, an 18 year old college student with no income and three other cards in his wallet could still get a shiny new Visa, MasterCard and American Express.
Students were courted with free t-shirts and other swag, right at the gates of campus. It was enticing, and boy did I ever get with the program. As a result, I graduated from college with nine (NINE!) different credit and charge cards, many of which were hovering dangerously close to their maximum credit limit.
And getting into credit card debt at such a young age ended up being my worst money mistake.
How Student Credit Cards Hurt Me
The biggest problem with getting into debt when young is that you don’t know how to handle it. Since this was before the days of the Internet and online payments, I ended up having two late payments when my checks didn’t go out on time. Those dings on my credit score stayed with me for seven years. That meant that I paid more for car loans and other credit, and saw my interest rates and fees go up.
Another problem with being buried by debt when you’re just starting your career is that you don’t have a lot of money to begin with. Money spent on servicing debt takes away from most of your other financial goals.
Early debt means saving less for retirement. Everyone knows that Social Security is on shaky ground and saving for retirement is a classic exercise in the time value of money. The sooner you get started and the more you sock away, the more you’ll be able to enjoy a fat nest egg in your golden years. Luckily I have a decent amount set aside in my retirement accounts, but being in debt meant that I never fully funded my 401(k) and therefore missed out on some tax savings.
My debt also made it tougher for me to buy my first home. I was fortunate in that I qualified for a government program to take ownership of a foreclosed condo, but I had so little money saved up that I struggled to make the down payment. I ended up taking out a loan from a pawnshop for the last thousand dollars. And you can ask anyone, having to use the services of a pawnshop is a good sign that you’ve messed up your money management.
Finally, getting into debt so soon forced me to work for money, not the love of what I was doing. I often wonder what career choices I would have made if I didn’t need to pay back all of those dinners in college long after I had graduated. Being beholden to debts is no way to start off as a young person.
All in all I can count my blessings; I was eventually able to get out from under that debt, I didn’t have a lot of student loans to worry about and my credit is strong. I’ve also learned a valuable lesson that I can pass on to my readers and my kids so they don’t make the same mistakes.
Unfortunately these lessons still need to be taught as today’s college students are still addicted to plastic and may be doomed to repeat what I did.