Did You Know That You Can Have A College Credit Card?
Add a Comment 
borrowing, college, Credit, credit card, credit card debt, debt, finance, student, undergraduate, university October 14th, 2008|
|
As its name implies a college credit card is simply a credit card that has been specifically designed for use by college students and is perhaps more commonly known as a student credit card. Student credit cards are meant to let students learn all about handling credit and to experience their benefits early in their lives. Really, a college credit card is an introduction into the credit card world and, although a student could have had experience of using a supplemental card on a parent’s account, it is the first credit card which the student will have had in his own name.
Effectively college credit cards work in precisely the same way as other credit cards but there are a few differences which you have to know about. These differences arise because the credit card issuers are taking something of a risk by giving credit to people who will generally have no credit history and thus they need to protect themselves from the increased chance of debt on student credit cards.
The first significant difference is that credit card issuers require that a parent or guardian co-signs the student’s card application, so that a responsible adult knows that the student is applying for a line of 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 legally liable to make good on any debt.
The second important difference with a college credit card is that the credit limit is generally set at a lower level than that seen on standard credit cards and is generally fixed at between $500 and $1,000. The limit is also set at a reasonably low level because this is considered to be adequate to meet the needs of most college students.
Finally, the credit card companies also cover their risk by setting the interest rates on college credit cards a bit higher than usual in an attempt to deter students from overspending on their cards and to persuade them to keep their spending within the sum that they can afford to pay off each month.
On the surface college credit cards might not seem terribly attractive to those of us who are accustomed to using standard credit cards but in fact they can be a very handy tool for teaching youngsters 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 extremely useful after they have finished college.
College is a very expensive time for many students and there are very few 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 all too many students have problems coping with this and finish up being forced to refinance their loans, frequently through student loan consolidation. When we now add a college credit card into the equation we might simply be providing the straw that breaks the camel’s back for some students.
Whether or not college credit cards are a truly good idea or just another marketing ploy by the credit card companies is something that you must judge for yourself however, whatever your view, they are undoubtedly something which must be approached with both eyes open if you are to avoid having to ask for debt assistance and repair your credit report history in the future.
Tags: borrowing, college, Credit, credit card, credit card debt, debt, finance, student, undergraduate, university