People offering credit cards to students are everywhere on campuses these days, and for good reason. The students may become lifelong card holders, and despite the bad hype surrounding credit cards, students should have one.
This is not to say that using credit cards isn’t a possibly dangerous financial choice, and students should consider some great points before signing their name on the dotted line. However, if used properly, student credit cards for students can be great tools to learn about financial responsibility, help them gain credit, and also provide a convenient method for paying for expenses.
Interest Rate after Sign on Period
Card issuers may use various methods to get a student to sign up for their card, including offering a lower, or even no interest rate for a specific period after the student gets the card. It is easy to just pay attention to this number, but comparing cards to get the best interest rate after the initial sign up period may save a student a lot of money down the line.
Check Your Bank
While you may get a free gift for signing up at a kiosk on campus or at a sporting event, these cards may come from a company you are not familiar with, and there may be surprises that come up when dealing with them. If you have a checking account, you may be able to get a student card from the company you are already banking with, who already has some information about your financial responsibility. The student may also be able to make automatic transfers to pay their bill if using a company they have a checking account with also.
While having a high limit can be an enticement to spend money, having available credit is very important. Many hotels and rental car agencies will put a hold on a credit card in a large sum, which would require the person to have this as available credit on their card. Having a card with at least $500 of available credit is a good starting point. At the same time, having a limit that is too high (several thousand) can lead the student to make impulse buys that they may have a hard time paying back.
A student may find that they are regularly using their card due to its convenience. In this situation, having a card with a rewards program may bring great benefits to the students, as they may be able to earn points towards large purchases, or airline tickets to visit home. Normally these reward programs continue for the student after they leave college if they keep the card with the same issuer.
It has been said that the average college student has five to seven active credit cards. Having this many cards can possibly look bad on a credit report, as it shows as revolving credit, and can be a temptation to spend money that the student doesn’t have. This can lead to a bad situation on a credit report and cause the student to start their adult life buried in debt.
Some cards come with annual fees that come out of the credit limit and the student is required to pay back each year. A student with no credit, or even a little good credit, should still be able to qualify for a card that doesn’t come with this unnecessary cost.
Special College Student Programs
There are also cards that offer additional programs targeted specifically at college students. They may provide rewards for paying on time, or event for receiving good grades. Taking advantage of these benefits may provide additional points towards purchases without having to even use the card any more than they were.
While it is true that misuse of a credit card can be dangerous and will have lasting effects on a student’s credit, using a card wisely will also allow a student the ease of paying for purchases quickly, help build their credit, and allow them to use services they may not be able to otherwise. While there are many options available, students will want to look around to ensure they are getting the card that is right for them and will provide them the most benefit without all the hassles.