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Have You Thought About Getting A College Credit Card?
By plrprousers | September 15, 2008
As its name would suggest a college credit card is a credit card that has been specifically designed for use by college students and is possibly better known as a student credit card. The idea behind student credit cards is that they let students learn all about handling credit and to experience their benefits early in their lives. In effect, a student credit card is an introduction into the world of credit cards and, although a student could have experienced using a supplemental card on a parent’s account, it represents the first credit card which the student will have in his own right.
In general terms student credit cards work in exactly the same way as normal credit cards but with some differences which you need to understand. These differences occur because the credit card issuers are taking a risk by offering credit to people who will frequently have no credit history and thus they need to protect themselves against the higher risk of debt on college credit cards.
The first major difference is that credit card issuers require that a parent or guardian co-signs the student’s application for a card, so that a responsible adult knows that the student is applying for a line of credit, and will also require the parent or guardian to stand as guarantor for the account. So, if the student defaults on the card the parent or guardian will be legally liable to make good on any debt.
The second significant difference with a student credit card is that the credit limit is normally set at a lower level than that seen on standard credit cards and is typically set at between $500 and $1,000. This limit is also set at a relatively low level because the card issuers consider this to be adequate to meet the needs of the vast majority of college students.
Finally, card issuers also cover their risk by setting the interest rates on college credit cards a little higher than normal in an attempt to deter students from overspending on their cards and to persuade them to maintain their spending within the sum which they can afford to pay off each month.
At first sight student credit cards might not seem terribly attractive to those of us who are used to handling normal credit cards but in reality they can be a very handy tool for teaching youngsters to manage credit responsibly and carry the additional benefit of giving student the ability to build up a good credit record, which they will find very useful once they have left college.
College can be a very expensive time for many students and there are very few students who will make it through college without a mix of parental support, grants and scholarships, federal loans, private loans and working part-time. This can be hard enough in itself to manage and all too many students have problems dealing with this and end up having to refinance their loans, often by using student loan consolidation. When we now add a credit card into the equation we could merely be providing the straw that breaks the camel’s back.
Now, whether college credit cards are truly a good idea or just another marketing ploy by the credit card companies is something which you will need to judge for yourself however, whatever you feel, they are certainly something which you need to approach with both eyes open if you are to avoid having to ask for help with debt problems and repair your credit report history at some point in the future.
Tags:borrowing,college,credit,credit card,credit card debt,debt,Finance,student,undergraduate,universityRelated posts
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