I’m a 21-year old college student; should I get a credit card to help pay for car repairs?

Joanna asks: I am a 21 year old college student, graduating in a year and a half. I’ve been blessed to have gotten by so far with little debt, mostly because of financial aid and scholarships. I have about $1,500 in savings and hope to have a job soon. I’ll need to get a new car soon; my current one needs up to $2,300 to repair it.

I plan on trading in this car once it is repaired and I have a steady income, but I need to figure out how to get it fixed first. I know I need to build credit as well, so would you recommend putting the repair on a new credit card so I can make small payments until I get a job (the one I am hoping to get pays well and will allow for much larger payments once I start)? I don’t want to drain my savings to fix this car just in case something else happens, but I do not like
debt. If it does sound like a good plan, what credit card would you recommend? I only plan on using the card for this one big repair cost, and once that is paid off, only small purchases to build credit, occasional big expenses for no more than a few hundred dollars for electronics and/or possibly small trips. What would you recommend?

Sorry to hear about your car troubles! I just shelled out $1,000 for car repairs last week and know exactly how painful that is. It sounds to me like you have a couple of things going on here: you need to figure out your transportation problem, you want to start building credit, and you’re wondering what a good first credit card would be.

$2,300 is a whopper of a repair bill, but still cheaper than buying a new car. The question is, will making this repair get you another year or two out of the vehicle? If not, is it worth repairing? Is there any way you can get by without a car until you get a job and can buy a new car? If not, would spending $2,000 on a clunker that will last a year or two be better? (That’s another question you can ask a mechanic you trust).

Alternately, you might consider trying to finance an inexpensive, but more reliable, new car sooner. If you can find a relative to cosign an auto loan for you through a local bank or credit union, you might be able to get a 36-month loan for a $6,000 to $10,000 quality used car. This will solve your car problem and help you build credit. It’s worth a shot.

I recommend trying these avenues only because I’m not sure getting a credit card to pay the repair bill is a great idea or if it will work at all. Typically when you get your first credit card (especially while you’re still a student and don’t have full-time work yet), the cards you can get approved for are going to have higher interest rates and lower interest rates than average. It’s not uncommon for your first credit card to only have a $500 limit and a 19 percent APR.

Should you still get a credit card? Sure. But you don’t need to carry a balance to build credit. It’s far better to get in the habit of using your card for things like gas and food and paying it in full each month. You’ll still build credit to help you down the road, but you won’t go into debt. Again, if you belong to a local bank or credit union, ask about starter credit cards there.

Alternatively, try the Discover Student Card or Citi Forward Visa. These cards are both designed for people “new to credit” so you’ll be more likely to be approved for them.

Good Luck!

David @MoneyUnder30