Have You Thought About Getting A College Credit Card?
As its name implies a college credit card is a credit card that has been specifically designed for use by college students and is perhaps better known as a student credit card. College credit cards are meant to let students learn all about handling credit and to experience their benefits early in their lives. Effectively, a college 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 account, it represents the first credit card that the student will have had in his own name.
Generally speaking student credit cards operate in precisely the same way as normal credit cards but with some differences which you need to know about. These differences occur because the credit card issuers are taking a risk by giving credit to individuals who will often have no credit history and thus they have to protect themselves from the increased chance of debt on student credit cards.
The first significant difference is that credit card companies require a parent or guardian to co-sign the student’s application for a card, so that the parent or guardian is aware that the student is applying for credit, and will also require that parent or guardian to stand as guarantor for the account. Therefore, if the student defaults on the card the parent or guardian will be legally liable to make good on the debt.
The second significant difference with a college credit card is that the credit limit is usually set at a lower level than that seen on standard credit cards and is normally set at between $500 and $1,000. The limit is also set at a fairly low level because the credit card companies consider this to be high enough to meet the needs of the vast majority of college students.
Finally, card issuers also offset their risk by fixing the interest rates on student credit cards a bit higher than normal in an attempt to stop students from overspending on their cards and to encourage them to maintain their spending within the amount which they can afford to pay off every month.
At first sight college credit cards might not appear terribly attractive to those of us who are used to using standard credit cards but in reality they can be a very useful tool for teaching young people to manage credit responsibly and have the added benefit of providing students with the ability to start building a good credit record, which they will find very useful once they leave college.
College can be an extremely expensive time for many students and there are only a few students who will make it through a college education without a mix of parental support, grants and scholarships, federal loans, privately arranged loans and working part-time. This can be difficult to manage and all too many students have problems dealing with this and end up with no option but to refinance their loans, generally by using student loan consolidation. When we add a college credit card into the mix we might simply be providing the straw that breaks the camel’s back for some students.
Whether or not student 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 but, whatever your view, they are unquestionably something which you need to approach with both eyes open if you wish to avoid needing to seek credit card debt help and repair your credit report history at some point in the future.