Bad Credit Gone

As its name says a college credit card is simply a credit card that has been designed for use by college students and is possibly better known as a student credit card. The idea behind college credit cards is that they let students learn all about 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, although a student could have had experience of using a supplemental card on a parent’s account, it represents the first credit card which the student will have had in his own right.

Generally speaking college credit cards operate in precisely the same way as other credit cards but there are some differences which you have to understand. These differences arise because the credit card companies are taking a risk by offering credit to individuals who will usually have no credit history and therefore they need to protect themselves against the increased risk of debt on college credit cards.

The first important difference is that the credit card companies require a parent or guardian to co-sign the student’s application for a card, so that the parent or guardian is aware that the student is asking for a line of credit, and will also require that parent or guardian to stand as guarantor for the account. Therefore, if the student defaults on the card then the parent or guardian will be required to make good on the debt.

The second important difference with a student credit card is that the credit limit is usually set at a lower level than that seen on other credit cards and is frequently set at between $500 and $1,000. The limit is also set at a fairly low level because this is considered to be high enough to meet the needs of the vast majority of college students.

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

At first sight student credit cards might not seem terribly attractive to those of us who are accustomed to handling standard credit cards but in fact they can be a very handy tool for teaching young people to manage credit responsibly and carry the added benefit of providing students with the ability to start to build up a good credit record, which they will find very useful after leaving college.

College is an extremely 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 is difficult to manage and far too many students have problems dealing with this and finish up with no option but to refinance their loans, often by using student loan consolidation. If we add a student credit card into the equation we might just be providing the straw that breaks the camel’s back for some students.

Now, whether student credit cards are in fact good idea or merely another marketing ploy by the credit card issuers is something which you will need to judge for yourself however, whatever you feel, they are certainly something you you need to approach with your eyes wide open if you wish to avoid having to seek help with debt problems and repair your credit report history in the future.