As its name says a college credit card is a credit card that has been designed for college students and is possibly more commonly known as a student credit card. College credit cards are meant to let students learn all about credit cards and to experience the benefits of credit cards early in their lives. Really, a student credit card is an introduction into the credit card world and, although a student might have had experience of using a supplemental card on a parent’s account, it represents the first credit card which the student will have had in his own name.
In general terms college credit cards operate in exactly the same way as other credit cards but with a few differences which you need to know about. These differences occur because the credit card issuers are taking a risk by allowing credit to people who will generally have no credit history and therefore they need to protect themselves from the increased chance of debt on student credit cards.
The first important difference is that the 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 asking for credit, and will also require the responsible adult to stand as guarantor for the account. In other words, should the student default on the card the parent or guardian will be required to make good on the 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 other credit cards and is frequently fixed at between $500 and $1,000. This 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 most college students.
Lastly, the credit card companies also cover their risk by fixing 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 keep their spending within the amount that they can afford to pay off each month.
At first sight student credit cards might not seem very attractive to people 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 providing students with the ability to start to build up a good credit record, which will be extremely useful once they have left college.
College can be a very expensive time for many students and there are not many students who will make it through college without a mixture of parental support, scholarships and grants, federal loans, private loans and a part-time job. This is difficult enough in itself to manage and far too many students have problems coping with this and finish up with no option but to refinance their loans, usually by using student loan consolidation. When we now add a student credit card into the equation we might just be providing the straw that breaks the camel’s back for some students.
Now, whether college 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 feel, they are without any doubt something which must be approached with your eyes wide open if you are to avoid having to seek credit card debt help and repair your credit report history in the future.
Tags: borrowing, college, Credit, credit card, credit card debt, debt, Finance, student, undergraduate, university