Student Credit Cards
How to Build your Credit with Student Credit Cards
To understand student credit cards, you must first understand the recent legislation that will affect nearly every college-age student who will apply for one. The credit card legislation recently signed into law by President Obama sets strict regulations for credit card companies, especially in regards to student credit cards.
The new credit card regulations are aimed at creditors taking advantage of college-age students; however, many opponents of the credit card legislation feel that these strict regulations could prove detrimental for college-age students that can no longer begin to establish their credit while in school.
Implications of Stricter Credit Card Regulations
Although the new credit card legislation covers many issues, one of the main points is that a college-age student (under 21) cannot receive a credit card if he or she does not have adequate income to pay for it. In this case, the student must have a parent co-sign on the credit card.
This may leave many college-age students without student credit cards, thereby inhibiting them from building a credit history. The result of a blank credit history could have many implications on newly graduated college students who are looking to rent an apartment, buy a home or purchase a car – all of which require a strong credit score. And without some type of credit established, the student can’t build a strong credit score.
However, for students who make a certain income, and for students who are able to secure student credit cards with the help from a parent, student credit cards can be a great way to manage finances while in college.
Benefits of Student Credit Cards
Whether it’s paying for books, buying supplies or purchasing a monthly bus pass, student credit cards can be extremely practical and convenient; particularly for students who are away from home and without cash at any given moment.
For parents, providing their college-age student with a student credit card can be particularly helpful. Student credit cards are a great way to provide their college-age child with spending power while away from home, as well as the ability to begin building a credit history, which we all know is incredibly important. In addition, parents can easily monitor the student’s purchases.
Student credit cards don’t need to be a license to spend either. They can be a smart way for parents to encourage their children to begin using credit wisely, all while the parents monitor the activity on the credit card.
Thanks to online tools and features, it is now easy to monitor student credit cards at any given time. Plus, it eliminates the need to send money, write checks, and manage all of the financial situations that can arise at any given time while your child is away at college.
Features of Student Credit Cards
Student credit card features typically include lower credit limits and higher interest rates, although this usually is not a problem if you and your college-age student plan to pay off the card each month.
There are many companies that offer student credit cards, so it is important to do your homework to make sure you are getting the best deal and rate possible.
It is unlikely that you will see creditors pushing student credit cards on campuses in the near future because of the tighter credit card legislation; however, there are still many creditors offering student credit cards online.
It is important to remember that it always pays to become educated and to learn about credit cards and all of their terms and conditions before applying for student credit cards. Building your credit history is very important, as is developing a healthy attitude toward responsible credit card use.
Take the time to read all of the information provided to you by companies offering student credit cards, including the cardholder agreement and the card’s terms and conditions. Most importantly, contact the credit card company if there is something you don’t understand, as a lack of knowledge can certainly come back to haunt you in the form of a poor credit score.
Although there have been many college-age students who improperly used student credit cards in the past, there are likely just as many that have used them responsibly to pay for college-related expenses and to build a strong credit history. Thus, it pays to look into both the advantages and disadvantages of using student credit cards.
