Have You Thought About Getting A College Credit Card?
Just As its name says a college credit card is a credit card which has been specifically designed for college students and is possibly better known as a student credit card. Student credit cards are meant to let students learn all about handling credit cards and to experience their benefits early in their lives. In reality, a college credit card is an introduction into the world of credit cards and, even though a student might have experienced using a supplemental card on a parent’s account, it is the first credit card which the student will have in his own name.
Effectively college credit cards operate in precisely the same way as other credit cards but with some differences which you have to know about. These differences arise because the credit card companies are taking something of a risk by extending credit to individuals who will normally have no credit history and thus they need to protect themselves against the increased risk 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 the parent or guardian is aware that the student is asking for credit, and will also require the responsible adult to stand as guarantor for the account. Therefore, if the student defaults on the card then the parent or guardian will be required to make good on any debt.
The second important difference with a college credit card is that the credit limit is usually set at a lower level than that seen on normal credit cards and is typically set at between $500 and $1,000. The limit is also set at a reasonably low level because the card issuers consider this to be adequate to meet the needs of most college students.
Finally, card issuers also cover their risk by fixing the interest rates on college credit cards a little higher than usual in an attempt to stop students from overspending on their cards and to persuade them to keep their spending within the amount which they can afford to pay off each month.
On the surface college credit cards may not appear terribly attractive to people who are accustomed to handling standard credit cards but in reality they can be a very useful tool for teaching young people to handle credit responsibly and carry the additional benefit of providing students with the ability to build up a good credit record, which will be very helpful after leaving college.
College can be a very expensive time for a lot of students and there are not many students who will make it through college without a mixture of parental support, scholarships and grants, federal loans, privately arranged loans and working part-time. This can be hard to manage and far too many students have problems dealing with this and end up with no option but to refinance their loans, generally through student loan consolidation. When we add a credit card into the equation we might just be providing the straw that breaks the camel’s back.
Whether or not college credit cards are really a good idea or just another marketing ploy by the credit card companies is something which you will have to judge for yourself but, whatever your view, they are undoubtedly something you must be approached with both eyes open.
Filed under: Business