Student Credit Cards – Are They Good Or Bad
Student credit cards are very popular nowadays, but what are the advantages and disadvantages of these credit cards. Companies court the profitable undergraduate market with specific cards, which are set apart by marketing techniques and their credit terms and benefits. Banks are eager to strike deals with colleges that allow them to set up tables filled with gifts such as a t-shirt to sign on the dotted line for a student card. They do this to reach you early in your spending career and turn you into a loyal customer. This is a large reason why card usage has tripled since 2003 amongst the ages of 18-23.
The Good
Student credit cards help in meeting the sudden requirements for money. These cards have plans specifically designed for college or possibly high school students. This is a great way for students to develop their credit history to use later in life. It is very important to start showing creditors that you are capable of making payments with credit. When getting out of college most students will want to get a car or start looking for a house. Banks will more than likely reject their application for anything if they do not have a credit score at all. While in college it makes it easier to buy things they need such as books, school supplies, and food. For responsible young people who want to manage their own finances, a charge card is a solid route to build credit. If approved most banks will only give them a $500 limit. This is nice because it really limits the student to small purchases. They are also a means for parents to watch what is being spent because most students have their statements sent home. It builds an understanding of spending in the family.
The Bad
Credit cards can be dangerous for younger individuals because they target a group of people with little income who are more likely to abuse a card because they have small amounts of cash and have little knowledge about finances. Most college students only take one or two finance classes at school and the value of being taught how to spend wisely is not enforced. The younger generation is being taught to spend, not save. The mentality of some kids is that since they know they will be working later on they might as well enjoy their time and spend freely and pay it back later. Unfortunately, a large percent of kids will be paying back those good times for many years. This is due to the fact that when they start making money, more debt is taken on in the form of a mortgage or new cars. The reward programs are often less but still available.
What you do early in your financial career sets the precedent for the rest of it. Habits are hard to break. If you are a student you should apply for a card even if you don’t need one. Use it thriftily on things such as gas or groceries. Those $35 bills will start building your credit and make it easier for you to be approved on a mortgage or a car loan as soon as you start working. You will also see that your limits will go up and banks will start competing for your business. If you need a credit card, be sure to apply for a low rate fixed credit card.