How Many Credit Cards Should a College Student Have?

As students head back to campuses across the country, they will be making a lot of decisions, from the major “What classes should I take?” to the mundane, “Where can I find the best bagels?”

And for many, one of those decisions will be, “How many credit cards should I have?”

It’s not a theoretical question. In fact, making the right choice here can impact students’ finances for many years to come. That’s because a credit card, used well, can provide a valuable and long-lasting credit reference.

But screw it up and you will pay the price for a long time.

Responsible students can benefit from getting a credit card before they graduate from college. Doing so allows them to build a credit history that will make it easier to rent a place to live or finance a car without a cosigner after they graduate. They will be able to take advantage of one of the safest ways to pay for purchases, especially online; plus they will have a card for situations that are truly emergencies.

But students need to be extra careful to keep their credit scores — their “real life report cards” — strong. A student who misses payments, for example, will have to live with that mistake for seven years. And missed payments can be especially detrimental to “thin” credit files that lack a variety of credit references. Here’s a guide on how payment history affects your credit scores.

Running up debt that can’t be repaid is another real risk. According to a report by the Federal Reserve Board this is a serious threat: “Data show that young U.S. households (of which a large percentage have both college and credit card debt) now have the second highest rate of bankruptcy (just after those aged 35 to 44).”

For all those reasons, the ideal number of credit cards for college students to carry is often one.

One card will allow them to build credit, but keep that process manageable. With a single card, it should be easy to keep track of purchases, the balance and the due date.

That same card will offer the safety and security of federal law that limits fraud losses to no more than $50. (Be careful though: Here are five things you should never put on a credit card.)

There is one major risk with carrying just one card, however — and that’s the risk that everyday purchases could wind up hurting your credit scores. That’s because one important factor in most credit scoring models is the “debt usage” ratio — a comparison of the balance that appears on the credit report against the available credit. With a small limit it’s easy to use more than 20-25% of the available credit, which can be detrimental to your credit score. For that reason, smart students will want to monitor their scores — which they can do for free at Credit.com — to make sure they get and stay on the right track in terms of building credit.

Just as a degree is an investment in a student’s future, used carefully, a credit card will provide a credit reference that will serve students well for years to come.