Poor financial literacy in the U.S. has gotten to the point that more than 2 million college students (1 in 10) believe credit cards are free money, according to the personal-finance website WalletHub’s 2019 College Student Financial Survey.
- 30% of students give their financial knowledge a grade of C or worse. 5X more female students than male students graded their financial knowledge an “F.”
- 14% of students would rather miss a payment than a party. Lower-income students are 4X more likely than high-income students to say they’d rather miss a payment than a party.
- 1 in 10 students say their parents would not approve of their credit card transactions. Nearly 2 in 5 students say their friends would make fun of their credit card transactions.
- Best Credit Card for Students: Discover it® Student chrome – 2% cash back on your first $1,000 in restaurant and gas purchases each quarter. 1% cash back on all other purchases. No annual fee or foreign transaction fee.
- Best Checking Account for Students: Capital One Money Teen Checking Account – No monthly fee, overdraft fee or ATM transaction fee. 0.25% APY on all balances.
Q&A with WalletHub CEO Odysseas Papadimitriou
Are you surprised that 1 in 10 students think credit cards are free money?
“Unfortunately, I am not surprised that 1 in 10 students think credit cards are free money, considering the current state of financial literacy education. Schools aren’t teaching money management, at least not nearly enough, and many parents are actually more comfortable talking about sex than money,” said WalletHub CEO Odysseas Papadimitriou.
Do you have any tips for teaching young people about money?
“It’s important to lead by example, for starters. Even if you don’t manage your finances responsibly, having an open dialogue about money management matters in your household and recognizing your mistakes can go a long way. Your children will naturally pick up a lot of good habits and useful information. As with any other skill, however, practice makes perfect. So it’s important to give young people experience managing a checking account and a credit card before they head off to college, while you can still supervise and provide feedback,” said WalletHub CEO Odysseas Papadimitriou. “Making your child an authorized user on a credit card account is a good way to introduce them to credit before they can qualify for a student credit card. Most issuers don’t have an age requirement but do allow you to set a custom spending limit for authorized users. You’ll have full visibility of their transactions, and they’ll start building credit history.”
How old do you have to be to get a student credit card?
“A lot of people have misinterpreted the post-recession credit card laws to mean that only applicants age 21 and up can get approved for a credit card account. That is not true,” said WalletHub CEO Odysseas Papadimitriou. “The minimum age to qualify for your own credit card account is still 18 years old. The post-recession rules just specify that applicants under the age of 21 will be judged based on their independent ability to pay, rather than household income.”