Oct
24
As its name says a college credit card is a credit card that has been designed for use by college students and is perhaps more commonly known as a student credit card. Student credit cards are meant to allow students to learn all about handling credit and to experience the benefits of credit cards 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 is the first credit card that the student will have in his own name.
To all intent and purpose student credit cards work in precisely the same way as other credit cards but there are some differences which you need to know about. These differences arise because the credit card issuers are taking a risk by offering credit to individuals who will generally not have any credit history and therefore they need to protect themselves against the higher chance of debt on college credit cards.
The first important difference is that credit card issuers require that a parent or guardian co-signs the student’s card application, so that a responsible adult is aware that the student is applying for credit, and will also require that parent or guardian to stand as a guarantor on the account. In other words, if the student defaults 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 generally set at a lower level than that seen on standard credit cards and is generally fixed at between $500 and $1,000. The limit is also set at a fairly low level because this is considered to be adequate to meet the needs of the vast majority of college students.
Finally, card issuers also cover their risk by fixing the interest rates on college credit cards a bit higher than usual to try to stop students from overspending on their cards and to persuade them to keep their spending within the amount that they can afford to pay off each month.
On the surface student credit cards may not appear very attractive to people who are used to handling normal credit cards but in reality they can be a very useful tool for teaching youngsters to manage credit responsibly and have the additional benefit of providing students with the ability to build up a good credit record, which they will find very useful after they have finished college.
College is a very expensive time for many students and there are very few students who will make it through a college education without a mixture of parental support, grants and scholarships, government loans, privately arranged loans and working part-time. This is hard enough in itself to manage and all too many students have problems dealing with this and finish up having to refinance their loans, generally by using student loan consolidation. When we now add a college credit card into the mix we might just be providing the straw that breaks the camel’s back.
Now, whether student credit cards are a truly good idea or merely another marketing ploy by the credit card companies is something which you will need to judge for yourself however, whatever you feel, they are unquestionably something which must be approached with your eyes wide open if you wish to avoid needing to seek help with debt problems and repair your credit report history in the future.
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