The key to finding the benefits, experts say, is solid credit management.
While credit is important, a recent study conducted by The Ohio State University shows younger Americans have higher debt and are paying it off at a slower rate.
The study stated that “a person born between 1980 and 1984 has credit card debt substantially higher than debt held by the previous two generations: on average $5,689 higher than his or her ‘parents’ (people born 1950 to 1954) at the same stage of life and $8,156 higher than his or her ‘grandparents’ (people born 1920 to 1924).”
Monique Marsico, a psychology and Spanish senior, said she knows firsthand about the pitfall of going into debt. Marsico got her credit card because she wanted, as many students do, to build credit, she said.
Marsico said the most important part about keeping out of debt is paying attention. Wells Fargo continuously raised her limit every time she got close to reaching her credit limit. At the time she thought this was good, she said. Then she realized it was getting out of hand. Eventually, she cut the card.
However, the debt is always there, she said.
“It’s a scary feeling,” Marsico said. “Then paying it back with interest, it’s tough.”
Anneliese Elrod, senior vice president of marketing at the New Mexico Educators Federal Credit Union, said the union aims to train students during orientation so that all are aware of how to approach credit cards.
“(Being a student) is the best time to try and build credit,” Elrod said.
The credit union works with students to help them build credit in a way that will not send them into a pitfall as many credit cards can and do, she said.
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This is typical of credit unions, she said. Since credit unions are owned by members, they are more likely to be involved in their clients’ best interests. Banks are often interested in the bottom line whether or not they are making money.
According to the Consumer Financial Protection Bureau, “In 2009, some 1,045 agreements were in effect. Since the Credit Card Accountability, Responsibility, and Disclosure Act went into effect, however, the number of agreements has decreased by nearly 70 percent, to the point that only 336 agreements were in effect by the end of 2013.”
The Credit CARD Act requires issuers to inform the CFPB of the terms and conditions of any college credit card agreement, the amount of new accounts, and compensation paid by issuers to institutions of higher education in the previous year. This act is what keeps the NMEFCU from issuing out student-specific credit cards, Elrod said.
Audrey Tobyas, a linguistics senior, said she has been extremely careful to not fall in the trap of over spending.
Tobyas said she took out a credit card with First Financial Credit Union because she specifically wanted to build credit. She kept her credit limit low, at $500.
“I never pushed (the limit) past what I knew two pay checks out of my life could cover,” she said. “Not that it wasn’t tempting, but I felt that I knew myself — I knew that I would fall into (debt) if I wasn’t strict with myself.”
Tobyas said the union worked with her to build her credit. She also stayed on top of her credit card.
Elrod said working with students to build credit is a standard practice at credit unions. At NMEFCU, employees work to tailor credit cards to help students get the desired outcome.
The secret, Elrod said, is to keep the balance below 30 percent of the credit card’s limit, Elrod said.
“Credit is probably one of the most important things you will ever have in your life,” Elrod said. “Organizations or employers that are starting to use credit scores, you’ll also see things like insurance agencies start to use credit scores, They are already using them.”
Moriah Carty is the assistant culture editor for the Daily Lobo. She can be reached at cultureassistant@dailylobo.com or on Twitter @MoriahCarty.
