Cards for Students
So you are enjoying yourself in collage. For some of you this is your first step away from home and your first chance to prove yourself in the real world. Now that you are self sufficient and independent you have decided it might be time to apply for your first credit card. There are dozens of cards out there designed just for students. They are great because credit companies are willing to take risks with students to build reliable customers in the future and because they can help you begin to build your credit.
This is a great place to start. Some students just get a credit card from their parents, but this isn’t going to help you start building your credit. Without credit you won’t be able to get a car loan or to buy that house that you want after college. With a student credit card you will get a chance to build your own credit along with your own accountability, but always remember to spend responsibly. Just as it is important to build your credit from as early as possible it is also important to develop good habits.
Some student credit cards require a cosigner, but for the most part issuers are willing to give a little to help students get their own cards. These cards work almost exactly like regular credit cards. Yes, I did say almost. Like everything else there are a few exceptions to the rule.
But what are those exceptions? We’ll start with Account Cosigners. These are not always required, but sometimes an issuer requires a parent or guardian to cosign to back the student up if he or she has trouble making the payments. Typical lines of credit are $500 and the guardian or parent can decide whether or not to accept any increase in the line of credit.
That being said, student credit cards generally have lower limits than traditional cards, even those without a cosigner. Since students tend to have little or no credit, lenders can be willing to take a small leap of faith. The traditional line of credit falls somewhere between $500 and $1,000. The other major difference, and a small downfall, is that the interest rates are generally higher. These higher rates help creditors offset and protect themselves from potential account defaults so it is a good thing for students, in a way. Without the higher credit limit the issuers wouldn’t be so willing to give out the cards.
The low limit is also a protection for the student. Face it, a student should not be using their fresh plastic to buy a 70” plasma for the frat house. A reasonably low limit allows the first-time credit card holder to get accustom to the process of spending wisely and allocating the funds to pay off the account each month.
In my opinion this helps students develop good habits early on. Like a normal credit card there are no interest rates applied to a balance paid in full. These higher rates allow students to limit their spending to a smart amount and get them in the practice of paying off the balance in full every month.