Student Credit Cards: The Pitfalls
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ARTICLES: Student Credit Cards: The Pitfalls
Student credit cards sound like an appealing proposition. Access to credit enables traditionally cash strapped students to access important implements needed for their college educations. In addition student credit cards often come with low credit limits and affordable payments which ensure that student do not get in over their heads when it comes to credit card debt. Even though the basic premises of student credit cards are quite logical, the end result of providing college students with access to credit is the development of a host of long-term financial problems which can impact the student long after they receive their college degrees.
A review of current literature on student credit cards indicates that even though these resources are provided with the best intentions on the part of both the lender and the borrower, the end result is often disastrous. This is because once a student acquires access to a line of credit, his or access only continues to increase over time. Once a student establishes a clear and consistent payment history with the credit card company, the company will increase the student’s credit limit. In most instances, students do not have the ability or financial acumen to understand the implications of student credit cards and use these resources to their fullest extent. Thus, when they leave college, students can have excessive debt, due in large part to the use of their student credit cards.
In an effort to improve outcomes in this area, the federal government is undertaking the issue and considering legislation which would limit the amount of credit that lenders are allowed to provide under student credit card agreements. Although this move may protect unsuspecting students against the long-term financial implications of using credit cards, the reality is that more education is needed to provide students with a clear understanding of the true impacts of credit on long-term financial outcomes.
Unfortunately, student credit cards appear to be another implement that has gone awry as a result of the efforts of banks to acquire more customers and capital. Even though credit cards can be an important tool for the struggling student, efforts to improve education about the long-term impacts of credit cards must be considered if these tools are to be used responsibly. Federal laws limiting student access to credit will also have a positive impact, ensuring that students do not become unwitting victims of a credit system run amuck.
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