Did You Know That You Can Have A College Credit Card?
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As its name would suggest a college credit card is a credit card which has been designed for college students and is possibly more commonly known as a student credit card. Student credit cards are meant to allow students to learn all about credit cards and to experience the benefits of credit cards early in their lives. Really, 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 credit card account, it is the first credit card which the student will have had in his own name.
In general terms college credit cards operate in precisely the same way as other credit cards but there are 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 people who will generally not have any credit history and thus they need to protect themselves against the higher chance of debt on college credit cards.
The first major difference is that credit card companies require that a parent or guardian co-signs the student’s application for a card, so that the parent or guardian knows that the student is applying for a line of credit, and will also require that parent or guardian to stand as a guarantor on the account. In other words, should the student default on the card the parent or guardian will be legally liable to make good on any debt.
The second major difference with a college credit card is that the credit limit is generally set at a lower level than that seen on other credit cards and is typically set at between $500 and $1,000. This limit is also set at a reasonably low level because the card issuers consider this to be adequate to meet the needs of the vast majority of college students.
Lastly, card issuers also cover their risk by setting the interest rates on college credit cards a little higher than usual in an attempt to stop students from putting too much on their cards and to persuade them to keep 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 those of us who are accustomed to handling normal credit cards but in reality they can be a very handy tool for teaching youngsters to handle credit responsibly and carry the added benefit of providing students with the ability to start to build up a good credit record, which they will find very useful once they have left 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 truly a good idea or just another marketing ploy by the credit card issuers is something which you will have to judge for yourself however, whatever your view, they are without question something you must be approached with your eyes wide open.
