Choosing and Using Student Credit Cards
Choosing and Using Student Credit Cards
Credit management is a skill that is often born of desperation. With the advent of student credit cards comes adult level of responsibility. Some students do possess an adult, mature level of responsibility and others are not ready to graduate to that level quite yet. There are pros and cons that need to be considered before applying for student credit cards.
Most student credit cards are targeted to the vulnerable18-25 age population. The advantages of placing plastic in the hands of this group include the following:
Building a credit history while still young
Medical or family emergencies
Travel arrangements
Purchase made by phone or internet
Cash advances for personal needs
Unfortunately, there is a serious downside to dispensing student credit cards and these include:
Use of plastic to pay tuition or fees
Purchase of books and supplies
Use of a student credit card to randomly obtain spendable cash
Inability to manage the monthly payments
Paying the monthly bill by getting cash advances from the student credit cards
Predatory Lending Practices
Credit card companies consider students to be great customers. They usually keep their very first credit card for a long, long time which, of course, is the definition of a loyal customer. These days, the requirements for obtaining any credit card are extremely lenient. This puts plastic in the hands of people who do not meet a minimum income level to responsibly maintain an account. Student credit cards fall into this category.
Most students do not have a steady income source, which makes it difficult to meet the monthly required payments. Lenders are counting on this situation and that is the very reason why student credit cards are so easily available. Credit card companies make an excellent income from late fees, annual fees and increased interest rates which all result from the inability of this target group to deal with debt.
Managing Student Credit Cards
A student who is considering the use of a credit card is advised to carefully compare the terms of several student credit cards. The ones with no annual fees should be at the top of the list for consideration.
There should be a reasonable credit limit on the account so that overspending will not become an issue. Pay the bill when it arrives so as to avoid late fees and hiked interest rates resulting from late payments.
Student credit cards should carry a requirement that the applicant take a course in personal finance before a card is issued. The financial management skills learned from that class will stay with them for the rest of their lives.
Student credit cards.com @ June 20, 2008