Should You Get a Credit Card If You’re Paying Off Student Loans? 7 Important Factors to Consider


If you are suffering under the burden of student loan debt like a staggering 40 million Americans are, then you might be afraid to dip your toes into the credit card scene for fear of getting into even more debt. Or you might just wonder what the point of using a credit card is when debit cards do many of the same things.

While there’s always the threat of credit card debt, if you are responsible with your finances and make your credit card payments on time, getting a credit card might actually be a smart financial move. Not only is it advisable to get acclimated to using a credit card responsibly, but it can also help build your credit.

To help you make your decision, here are some pros and cons of getting a credit card before paying off your student loan debt:

Reasons You Should Pay Off Your Loans Before Getting a Card

1. You’re not careful with your spending. If you have a credit card, studies show it’s far easier to spend on things you normally wouldn’t, especially if you have a substantial balance available. You could easily accrue credit card debt in addition to your student loan debt. Credit cards typically have higher interest rates than student loans. The average credit card APR nationwide is around 15% while student loans are much lower.

2. You’re concerned about making payments on time. Using credit cards can take the focus away from your debt repayment strategy. You already have one bill to remember every month: your student loan bill. Sometimes adding on a credit card or multiple credit cards complicates this.

3. You’ve yet to learn discipline. When you go through all the effort to pay off your student loans, you develop a level of financial discipline. Because of this, you will be less likely to fall into a debt trap with credit cards if you wait to use them until after your loans are paid off, because you will know how hard it is to get out of debt.

Reasons You Shouldn’t Pay Off Your Loans Before Getting a Credit Card

Continuing with the list, here are the plus sides to getting a credit card:

4. You want to build credit history. Credit cards, along with your student loan history, help to build your credit if you use them responsibly. Credit cards are considered revolving credit (no pre-determined loan or payoff schedule) unlike student loans, which are considered installment loans (with a set balance to pay back by a certain time). Revolving credit and how you utilize it makes up 30% of your FICO credit score, so it’s important to pay off your balance every month.

5. You want to track spending. Credit cards, when used correctly, can help give you track your spending habits in ways that using cash can’t. A debit card can do the same thing, except debit cards might not have as many built-in benefits and protections as credit cards.

6. You want the free perks and benefits. Speaking of built-in protections from credit cards, many credit card companies automatically include things like rental car insurance or trip cancellation insurance. Protection types and amounts vary by card, but they’re quite common across all credit card types.

7. You’re learning to be financially responsible. If you can handle a credit card, not overspend, and remember to make your payments each and every month, then you are certainly ready to make a plan to aggressively pay down your student loan debt.

Ultimately, the choice over whether or not you should pay off your loans before applying for a credit card is entirely up to you.

When you do get your first card, use it for small purchases, like going to the grocery store or getting gas so you get into the habit of using it and paying it off on time.

It’s also smart to set up your credit card to automatically make the minimum payment. While we highly recommend paying off your credit card in full every month, having automatic backup is great if you forget to pay.

Remember that your payment history makes up 35% of your credit score, so above all else, make sure you always pay your credit card on time every time.

With these tips, you should be well on your way to responsible card ownership, regardless of whether you wait until you pay off your student loans to apply for one.

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