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Are You Aware Of The Fact That You Can Have A College Credit Card?
By plrprousers | May 9, 2009
As its name says a college credit card is a credit card which has been designed for college students and is possibly more commonly known as a student credit card. The idea behind college credit cards is that they allow students to learn all about credit cards and to experience their benefits early in their lives. Really, a student credit card is an introduction into the world of credit cards and, although a student might have had experience of using a supplemental card on a parent’s credit card account, it is the first credit card which the student will have had in his own right.
In general terms college credit cards work in exactly the same way as ordinary credit cards but with a few differences which you have to know about. These differences occur because the credit card issuers are taking a risk by extending credit to people who will generally not have any credit history and thus they have to protect themselves from the increased risk of debt on student credit cards.
The first main difference is that credit card companies require that a parent or guardian co-signs the student’s card application, so that a responsible adult knows that the student is asking for a line of credit, and will also require that parent or guardian to stand as guarantor for the account. Thus, should the student default on the card then the parent or guardian will be required to make good on the debt.
The second important difference with a student credit card is that the credit limit is usually set at a lower level than that seen on standard credit cards and is usually fixed at between $500 and $1,000. This limit is also set at a fairly low level because the card issuers consider this to be sufficient to meet the needs of most college students.
Lastly, card issuers also cover their risk by setting the interest rates on college credit cards a bit higher than usual in an attempt to deter students from overspending on their cards and to persuade them to maintain their spending within the amount which they can afford to pay off each month.
On the surface college credit cards might not appear very attractive to people who are used to using normal credit cards but in reality they can be a very useful tool for teaching young people to manage credit responsibly and have the additional benefit of providing students with the ability to start building a good credit record, which they will find very useful once they have left college.
College can be an extremely expensive time for most students and there are not many students who will make it through a college education without a mixture of parental support, grants and scholarships, federal loans, privately arranged loans and working part-time. This is hard to manage and all too many students have problems coping with this and finish up having to refinance their loans, usually by using student loan consolidation. When we add a college credit card into the equation we might just be providing the straw that breaks the camel’s back for some students.
Now, whether college credit cards are in fact good idea or just another marketing ploy by the credit card issuers is something which you must judge for yourself however, whatever you decide, they are without question something you must be approached with both eyes open if you wish to avoid needing to ask for help with debt problems and repair your credit report history at some point in the future.
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