Entering college is both exciting and daunting since itís the start of your journey to adulthood. College actually opens up a lot of opportunities like finally being able to live independently away from your parents and then being able to budget your own monthly allowance sent by your parents. Most parents open a credit card account in their childrenís name or provide them with a second card on their personal credit card account. Parents do this in anticipation of some future emergency that their children might meet or if ever they failed to send their childrenís monthly allowance at least the card can help their children in purchasing for the meantime some of their needs.
Another financial assistance available for students is the student credit card which is issued in their own names.
What is a student credit card?
It is a type of credit card that is designed for high school and college students. These cards function in the same way as any credit card issued by any financial institution. However, they have a few restrictions.
Some of the restrictions are as follows:
1. Some issuers require for a parent or guardian to co-sign meaning that the studentís parents must agree to be the guarantor in case a student fails to repay part or all of the outstanding credit card balance. This is advantageous in some point since parents will have the control over the limit of available credit to be given to their children.
2. A much lower credit limit is provided to students. Issuers are aware that students have very limited sources of funds that is why they also offer a lower credit limit. Aside from that, students donít have yet any credit history so issuers donít have any basis in terms of their capacity to pay off debts. A low credit limit is provided to get students started building their own credit scores and the same time limiting the risk of loss of the issuer of the credit card.
3. The interest provided for student credit cards are much higher. This is the issuerís way of decreasing their risk of loss. The higher interest provides a way for credit card issuers to spread the losses over the entire student credit card population.
Why student credit cards are important?
Student credit cards offer great benefits if and only if responsibility is practiced in the using the credit card. A student credit card can help teach students responsibility and money management. Learning the benefits of building a good credit rating is important to help students understand the significant role that credit history will play in all their future endeavors.
Before signing any credit application or contract, a student needs to understand that they are fully responsible for paying the bills. Here are some rules of credit management that aims to guide you in avoiding future credit card problems:
1. Try to read carefully all information written on the application most especially the fine print because some of the important points of the application are stated there.
2. Before you sign for a credit card try to consider other options like debit cards. For debit cards, money are directly deducted from your checking account so canít spend beyond your deposited amount.
3. Be sure that when you apply for a credit card you will be able to repay the debt or else you will just submit yourself to an ever increasing accumulation of interest charges that will haunt you even after you graduate. Remember that when it comes to credit cards, itís just not possible to run away from your debt.
4. For your sake please avoid impulse shopping which tends to max out your credit card.
5. Make use of your credit card only for emergencies. If you are planning on using your credit card to pay off your spring break vacation then be prepared to pay the price because itís sure going to be higher than any waves you experienced on the beach.
6. To avoid temptation, it is much better if you refrain from always carrying your credit card. Bring it only with you if there is any important monetary emergency.
7. Always try to pay your bills early so you get to keep other charges to a minimum. Aside from that, some banks provide discounts for early payment that provide additional savings for you.
And lastly by using your student credit card wisely can help you in establishing a strong credit history that can lead to good mortgage rates and lower rates on some of the future loans which you are likely to apply for like car loans, housing loans and other types of loans.