Student credit cards are just like a regular credit card when it comes to using it to purchase products and services. There are no restrictions in terms of what you can use them for and they give the student the convenience of having a major credit card at their disposal. However, there are some important differences and restrictions to student credit cards that parents and students need to be aware of.
Usually student credit cards require that there be a co-signer on the account. The reason for this is that students usually don’t have established credit histories or enough income to qualify for a credit card by themselves. Being a co-signer on a student credit card makes the person responsible for any debt incurred on the card. Before becoming a co-signer on a credit card, parents need to understand what the liabilities and responsibilities are and set the expectations and ground rules for use of the card with the student.
Student credit cards usually have lower spending limits and higher interest rates than regular credit cards. The reason for this is because of the risk associated with giving credit to students. The spending limit on student credit cards vary, but are generally within the range of $300 to $1000. This limit still provides the student with enough credit to pay for books and other college expenses.
Student credit cards are easy to apply for. There are usually tables or booths set up on college campuses at the beginning of each school term. Before signing up for a card, the student and parents should read the terms and conditions carefully.
There are both pros and cons associated with student credit cards. The main disadvantage to student credit cards is that it introduces students to spending money they don’t have and potentially incurring debt at a young age. Students may use the credit card irresponsibly and purchase unnecessary items with the card. Some parents pay the credit card bill each month, but to teach the student financial responsibility it may be a good idea to have the student responsible for paying the bill.
There are also advantages to student credit cards. Using a credit card can help the college student learn how to manage their money and credit and also build up their credit history. If the student is responsible with the credit card and pays the bill on time and keeps the balance low or pays it off each month, this activity can help to build a positive credit history for the student. Having good credit will help the student once they graduate from school and are applying for jobs or purchasing a car or house.