What is a college credit card?
College credit cards are the credit cards that have been specially designed for college students. College credit cards are more popularly known as student credit cards. College credit cards allow the students to experience the benefits of credit cards much earlier in their life. Through college credit cards, the college students are able to learn more about credit cards and their use.
In fact, for most of the students, their college credit card is their first credit card that acts as a gateway to the world of credit cards. Some other students might have previously used supplementary credit cards linked to their father’s credit card account; however, for such students too, their college credit card is the first one that is truly theirs.
College credit cards are not very different from other types of credit cards in the basic sense; they function in the same way as any credit card would. However, there are some differences, which basically arise from the fact that college credit cards are used by people who have no prior experience with credit cards and who perhaps don’t understand the concept of credit cards completely. Hence, the credit card supplier is at risk with issuing credit cards (college credit cards) to such people whom he is not sure about.
Most of the students don’t have a credit history either. In such a case, the supplier of college credit card cannot be sure of receiving the credit card bill payments in time (and even receiving them at all). To counter such risks, the supplier of college credit card requires the parent of the student to co-sign the college credit card application form as a guarantee.
Moreover, the credit limit on college credit cards is generally around $500-$1000 per month, which is lower than what it is for other credit cards (this credit limit is generally sufficient to fulfill the typical needs of a student). Another risk mitigation instrument used by the college credit card suppliers is the interest rate or APR. The APR on college credit cards is generally higher than that for other credit cards. Again, this is done to dissuade the students from over spending on their college credit card (and finally not being able to pay their credit card bills).
However, if we were to look at these impositions in a positive sense, we would find that these are actually in favor of the student (who is still getting trained to take on the real world of credit cards). Moreover, college credit cards also help the students in establishing a (good) credit history which is another important benefit that becomes handy when the student needs any type of loan at a later stage in his/her life. So, a college credit card for your son or daughter is something to really consider. What you do not want to see is your son or daughter running up a high credit card debt.
About college credit card debt
Credit card debt is treated by credit card companies the same for everyone. It does not matter whether the person is a seasoned professional or just a college student. Since the credit limit on college student credit cards is much lower, the college student credit card debt cannot rise to the levels it does for other credit cards used by the general non-college population.
However, college student credit card debt is a unique menace because a lot of students are already in debt due to the loan they have taken for their education. If a student leaves college with college student credit card debt, they will have to payback not just the student loans they taken out for a higher education, but also their college student credit card debt.
Since most of the college students are inexperienced in the usage of credit cards, they can easily fall prey to excessive ‘college student credit card debt’. In fact, college student credit card debt is one reason why the credit card suppliers keep a lower credit limit on college student credit cards. The solution for avoiding college student credit card debt is similar to what it is for avoidance of any type of credit card debt.
The first thing for avoiding college student credit card debt is to understand the concept that credit card is not free money and that whatever you pay-for using your credit card has to be paid back to the credit card supplier when your credit card bill arrives. So don’t treat credit card separate from hard cash. Avoid over spending e.g. do not buy things just because they are on sale, sales keep coming and going and there are always better offers each time; buy only those things that you really need.
A good thing to do is to prepare your monthly budget and follow it religiously. Never budge from your budget. Only use your credit card for emergencies. Only use your credit card when you know you have (or shortly will have) the cash to pay for the transaction you are making. Another very important preventive measure for avoiding college student credit card debt is to avoid going for a second credit card. Some students have a tendency to go for multiple credit cards just because the credit limit on college student credit cards is very low. However, this is a perfect recipe for getting into a college student credit card debt. This is how college student credit card debt builds up. One credit card is more than enough for any student.
College student credit card is really meant to be treated like a training ground for learning more about credit cards. It should not be make an instrument of debt (college student credit card debt).
