Just as its name would suggest a college credit card is simply a credit card that has been designed for college students and is possibly more commonly known as a student credit card. The idea behind student credit cards is that they 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 into the world of credit cards and, although a student may have had experience of using a supplemental card on a parent’s credit card account, it represents the first credit card that the student will have in his own right.
In general terms college credit cards operate in exactly the same way as ordinary 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 allowing credit to people who will normally have no credit history and therefore they need to protect themselves against the increased chance of debt on college credit cards.
The first significant difference is that the credit card companies require a parent or guardian to co-sign the student’s card application, so that the parent or guardian is aware 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, if the student defaults on the card then the parent or guardian will be required to make good on any debt.
The second major difference with a student credit card is that the credit limit is normally set at a lower level than that seen on normal credit cards and is generally fixed at between $500 and $1,000. This limit is also set at a relatively low level because the credit card companies consider this to be sufficient 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 to try to deter students from overspending on their cards and to persuade them to maintain their spending within the sum that they can afford to pay off every month.
At first sight student credit cards may not appear terribly attractive to people who are used to handling standard credit cards but in fact they can be a very handy tool for teaching youngsters to manage credit responsibly and have the added benefit of giving student the ability to start to build up a good credit record, which will be very helpful after they have finished college.
College can be a very expensive time for most students and there are only a few students who will make it through college without a mixture of parental support, scholarships and grants, 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 coping 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 mix we might merely be providing the straw that breaks the camel’s back.
Whether or not college credit cards are a truly good idea or just another marketing ploy by the credit card issuers is something which you must judge for yourself but, whatever you feel, they are without question something which you need to approach with both eyes open if you wish to avoid having to ask for debt assistance and repair your credit report history at some point in the future.