Did You Know That You Can Have A College Credit Card?
August 17, 2008
Just As its name says a college credit card is a credit card which has been designed for use by college students and is possibly more commonly known as a student credit card. College credit cards are meant to let students learn all about handling credit cards and to experience their benefits early in their lives. Effectively, a college credit card is an introduction into the world of credit cards and, even though a student could have had experience of 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.
To all intent and purpose college credit cards operate in exactly the same way as ordinary credit cards but there are some differences which you need to understand. These differences arise because the credit card issuers are taking something of a risk by giving credit to individuals who will often not have any credit history and therefore they need to protect themselves against the increased chance of debt on college credit cards.
The first important difference is that the credit card companies require that a parent or guardian co-signs the student’s card application, so that the parent or guardian is aware that the student is applying for credit, and will also require the 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 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.
Finally, card issuers also cover their risk by fixing the interest rates on college credit cards a little higher than usual in an attempt to stop students from overspending on their cards and to persuade them to keep their spending within the amount which they can afford to pay off each month.
On the surface college credit cards might not appear very attractive to those of us who are used 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 additional benefit of providing students with the ability to build up a good credit record, which they will find very useful after they have finished college.
College is a very expensive time for many students and there are not many students who will make it through a college education without a mix of parental support, grants and scholarships, federal loans, private loans and working part-time. This is hard to manage and far too many students have problems dealing with this and end up having to refinance their loans, often through student loan consolidation. If we now 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.