Nov
Just as its name implies a college credit card is simply a credit card that has been specifically designed for college students and is possibly better known as a student credit card. The idea behind student credit cards is that they allow students to learn all about credit cards and to experience the benefits of credit cards early in their lives. Effectively, a college credit card is an introduction to the world of credit cards and, even though a student could have experienced using a supplemental card on a parent’s account, it represents the first credit card that the student will have in his own name.
Generally speaking student credit cards work in exactly the same way as other credit cards but with a few differences which you need to know about. These differences arise because the credit card companies are taking something of a risk by extending credit to individuals who will usually have no credit history and therefore they need to protect themselves from the increased risk of debt on student credit cards.
The first important difference is that the credit card issuers require a parent or guardian to co-sign the student’s application for a card, so that the parent or guardian knows that the student is asking for a line of credit, and will also require that parent or guardian to stand as a guarantor on the account. So, should the student default on the card the parent or guardian will be legally liable to make good on any 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 normal credit cards and is generally fixed at between $500 and $1,000. This limit is also set at a fairly low level because this is considered to be enough to meet the needs of most college students.
Lastly, card issuers also offset their risk by fixing the interest rates on student 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 amount which they can afford to pay off each month.
At first sight college credit cards might not appear very attractive to people who are used to handling standard credit cards but in fact they can be a very handy tool for teaching young people to manage credit responsibly and have the additional benefit of giving student the ability to start building a good credit record, which they will find very useful once they leave college.
College can be a very expensive time for most students and there are only a few students who will make it through a college education without a mix of parental support, scholarships and grants, federal loans, private loans and a part-time job. This is hard enough in itself to manage and far too many students have problems coping with this and end up having to refinance their loans, generally through student loan consolidation. If we now add a student credit card into the equation we might merely be providing the straw that breaks the camel’s back for some students.
Now, whether student credit cards are in fact good idea or just another marketing ploy by the credit card issuers is something that you will have to judge for yourself however, whatever you decide, they are without any doubt something you must be approached with both eyes open if you are to avoid needing to seek debt assistance 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, university