Finance and Credit Professional

As its name implies a college credit card is simply a credit card which has been specifically 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 handling credit and to experience their benefits early in their lives. Effectively, a student credit card is an introduction into the world of credit cards and, even though a student might have experienced using a supplemental card on a parent's credit card account, it is the first credit card which the student will have in his own name.

To all intent and purpose student credit cards work in precisely the same way as ordinary credit cards but with some differences which you have to know about. These differences arise because the credit card issuers are taking something of a risk by extending credit to individuals who will often have no credit history and therefore they need to protect themselves against the increased risk of debt on college credit cards.

The first main difference is that credit card issuers require that a parent or guardian co-signs the student's card application, so that a responsible adult knows that the student is asking for a line of credit, and will also require the responsible adult to stand as a guarantor on the account. Therefore, should the student default on the card then 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 normally set at a lower level than that seen on normal credit cards and is usually set at between $500 and $1,000. This limit is also set at a reasonably low level because the credit card companies consider this to be enough to meet the needs of the vast majority of college students.

Finally, card issuers also cover their risk by setting the interest rates on student credit cards a bit higher than normal to try to deter students from overspending on their cards and to encourage them to keep their spending within the amount that they can afford to pay off every month.

At first sight college credit cards might not seem very attractive to people who are accustomed to handling normal credit cards but in reality they can be a very handy tool for teaching young people to handle credit responsibly and have the additional benefit of providing students with the ability to start to build up a good credit record, which will be extremely useful after leaving college.

College can be an extremely expensive time for many students and there are not many students who will make it through college without a mixture of parental support, grants and scholarships, federal loans, private loans and a part-time job. This can be hard to manage and all too many students have problems coping with this and finish up having to refinance their loans, usually through student loan consolidation. If we add a college credit card into the equation we could simply be providing the straw that breaks the camel's back.

Whether or not college credit cards are a truly good idea or merely another marketing ploy by the credit card issuers is something which you must judge for yourself but, whatever you think, they are without any doubt something you you need to approach with both eyes open if you are to avoid having to seek credit card debt help and repair your credit report history in the future.

Related News

Bligh to cut mortgage taxes in budget (AAP via Yahoo!7 News)
Home buyers are set to benefit from Tuesday's Queensland state budget with the abolition of a tax on property mortgages. ...more

Subsidized landlords skipping mortgages, taxes (WKYC Cleveland)
Subsidized landlords skipping mortgages, taxes ...more

Mea Gulpa (Pittsburgh City Paper)
By Rich Lord. ...more

Strong Fourth Quarter and Year-End Financial and Operational Results for Cogeco Cable (Marketwire via Yahoo! Finance)
Today, Cogeco Cable Inc. announced its financial results for the fourth quarter and fiscal year 2007 ended August 31, 2007. ...more

Rates on 30-year mortgages sink (The Myrtle Beach Sun News)
Rates on 30-year mortgages sank this week to their lowest point since late May, providing a little ray of sunlight for would-be home buyers. Freddie Mac, the mortgage company, reported Thursday that 30-year, fixed-rate mortgages averaged 6.52 percent. That was down from 6.62 percent last week and was the lowest rate since the week ending May 31, when rates stood ...more