It’s almost time for college and university students to head off to class and that means packing up, buying new supplies, and figuring out finances. Most new college students have their own bank account, scholarships, and perhaps student loans–but what about their own credit card?
Student Credit Card Facts:
Student credit cards today actually function in much the same way as any credit card. Many of them have a rewards system, you can use them anywhere you’d use a normal credit card, and they have sub-niches such as travel rewards, cash back, and low or no interest cards. The majority of rewards are tied to things students buy most, like school supplies, food, and gasoline. They generally have a higher interest than other credit cards, but no annual fee.
Most credit card issuers, including Discover, Capital One, and Citi, offer at least one student card. These credit cards are all intended for use only by students, which means that you’ll have to prove that you are a registered student at a college or university.
Learning to Manage Credit
Aside from the fact that student cards give students a leg up when it comes to establishing a credit history, it also makes a good learning tool. One of the problems today with debt is that many people don’t understand how to use it properly because they have never been exposed to it in a more controlled environment. Student credit cards are more controlled than normal credit cards while still giving similar benefits–and since the credit limit is lower, it’s harder to get in debt. It’s also a great way to give financially strapped students a bit of breathing room between student loans or between pay checks–and can also be used to pay for tuition and registration online, avoiding long line-ups and ensuring faster registration. Some schools even require tuition payment before the student loan would come into the bank, making it necessary to have alternative funds.
Parents may have to co-sign on the credit card, at least the first time. This is also a good way to discuss finances, dealing with debt and credit and managing the books responsibly…important life lessons for anyone! And that way, if anything goes horribly wrong with their finances, at least the parents can step in and help out before the student’s credit is irrevocably damaged.
All in all, student credit cards are a great way to get students off on the right foot when it comes to their finances. They help a student pay the bills and get extra money as needed and starts a credit history early on so that graduate students can obtain loans and mortgages that they will need later on. Just don’t get into trouble by running up a large balance and not being able to pay it off. The best approach? Only make purchases with funds you know are available. I cannot stress how important it is to learn–and stick with–this important financial lesson.