Have You Considered Getting A College Credit Card?

Just as its name says 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. Student credit cards are meant to let students learn all about credit cards and to experience their benefits early in their lives. In reality, a college credit card is an introduction to the world of credit cards and, even though a student may 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 right.

In general terms college credit cards operate in exactly the same way as normal credit cards but with a few differences which you have to know about. These differences occur because the credit card issuers are taking something of a risk by giving credit to individuals who will normally not have any credit history and thus they have to protect themselves from the higher chance of debt on college credit cards.

The first significant difference is that the credit card issuers require a parent or guardian to co-sign the student’s card application, so that a responsible adult knows that the student is asking for credit, and will also require that parent or guardian to stand as a guarantor on the account. Thus, should the student default on the card the parent or guardian will be required to make good on the debt.

The second main 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 frequently fixed at between $500 and $1,000. The limit is also set at a reasonably low level because the credit card companies consider this to be high enough to meet the needs of most college students.

Finally, card issuers also cover their risk by setting the interest rates on student credit cards a bit higher than normal to try to deter students from overspending on their cards and to encourage them to maintain their spending within the sum which they can afford to pay off each month.

On the surface student credit cards may not seem terribly attractive to those of us who are accustomed to handling standard credit cards but in reality they can be a very handy tool for teaching youngsters to manage credit responsibly and have the added benefit of providing students with the ability to start to build up a good credit record, which will be very helpful after leaving college.

College is an extremely expensive time for most students and there are very few students who will make it through college without a mix of parental support, scholarships and grants, government loans, private loans and working part-time. This is difficult enough in itself to manage and far too many students have problems coping with this and end up being forced to refinance their loans, usually by making use of student loan consolidation. If we now add a college credit card into the equation we might just be providing the straw that breaks the camel’s back.

Now, whether college credit cards are a truly good idea or simply another marketing ploy by the credit card companies is something that you will have to judge for yourself but, whatever you feel, they are certainly something which must be approached with your eyes wide open if you wish to avoid having to ask for debt assistance and repair your credit report history at some point in the future.

Originally posted 2009-06-04 17:06:38.

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Tags: borrowing, college, credit, credit card, credit card debt, debt, finance, student, undergraduate, university