Have You Thought About Getting A College Credit Card?

As its name would suggest a college credit card is a credit card that has been specifically 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 their benefits early in their lives. Effectively, a student credit card is an introduction into the credit card world and, although a student could have experienced 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 college credit cards work in precisely the same way as other credit cards but with some differences which you need to know about. These differences occur because the credit card companies are taking a risk by extending credit to people who will often not have any credit history and therefore they need to protect themselves from the higher risk of debt on student credit cards.

The first important difference is that the credit card issuers require a parent or guardian to co-sign the student’s card application, so that the parent or guardian knows that the student is applying for credit, and will also require that parent or guardian to stand as guarantor for the account. Thus, should the student default on the card the parent or guardian will be required to make good on any 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 standard credit cards and is normally 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 sufficient to meet the needs of most college students.

Lastly, card issuers also offset their risk by setting the interest rates on college credit cards a bit higher than normal in an attempt to stop students from overspending on their cards and to encourage them to keep their spending within the sum that they can afford to pay off every month.

At first sight college credit cards might not appear very attractive to people who are accustomed to handling normal credit cards but in reality they can be a very useful tool for teaching youngsters to handle credit responsibly and carry the additional benefit of giving student the ability to start building a good credit record, which will be extremely useful after leaving college.

College is 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, government loans, privately arranged loans and working part-time. This can be difficult enough in itself to manage and far too many students have problems dealing with this and end up having to refinance their loans, frequently by using student loan consolidation. If we now add a credit card into the mix we could just be providing the straw that breaks the camel’s back.

Whether or not student 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 however, whatever you decide, they are undoubtedly something which must be approached with your eyes wide open if you wish to avoid needing to seek help with debt problems and repair your credit report history in the future.