Have You Thought About Getting A College Credit Card?

Sep 16, 2008 Credit Advice

As its name would suggest a college credit card is simply a credit card that has been designed for college students and is possibly better known as a student credit card. The idea behind student credit cards is that they let students learn all about handling credit and to experience their benefits early in their lives. In reality, a college credit card is an introduction into the world of credit cards and, although a student may have had experience of using a supplemental card on a parent’s account, it is the first credit card which the student will have in his own right.

In general terms student credit cards operate in exactly the same way as ordinary credit cards but there are some differences which you need to know about. These differences occur because the credit card companies are taking something of a risk by giving credit to people who will frequently not have any credit history and therefore they need to protect themselves from the increased chance of debt on college credit cards.

The first significant difference is that the credit card issuers 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 credit, and will also require the parent or guardian to stand as guarantor for the account. Therefore, if the student defaults on the card the parent or guardian will be legally liable to make good on the debt.

The second major difference with a college credit card is that the credit limit is usually set at a lower level than that seen on standard credit cards and is frequently set at between $500 and $1,000. The limit is also set at a relatively low level because this is considered to be adequate to meet the needs of most college students.

Lastly, card issuers also offset their risk by fixing the interest rates on college credit cards a bit higher than normal to try to deter students from overspending on their cards and to persuade them to maintain their spending within the sum which they can afford to pay off each month.

On the surface student credit cards might not appear very attractive to those of us who are used to handling normal credit cards but in fact they can be a very useful tool for teaching young people to handle credit responsibly and carry the added benefit of giving student the ability to start building a good credit record, which will be very helpful once they leave college.

College can be a very expensive time for a lot of 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, federal loans, private loans and a part-time job. This can be hard to manage and far too many students have problems dealing with this and finish up having to refinance their loans, generally by using student loan consolidation. When we add a credit card into the mix we might merely be providing the straw that breaks the camel’s back.

Now, whether student credit cards are a truly good idea or simply another marketing ploy by the credit card companies is something which you will have to judge for yourself but, whatever you think, they are undoubtedly something which you need to approach with both eyes open if you are to avoid needing to ask for help with debt problems and repair your credit report history at some point in the future.

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