What Makes a Student Credit Card Different

Pretty much the day someone turns 18, the credit card offers start arriving in the mail.  When your child starts college, they’ll be hit with even more offers and deals for credit cards both through the mail and on their college campus.  Credit card companies have been known to set up tables around campus and offer free t-shirts and pizza in exchange for signing your name on the credit card application.

Credit cards designed for students have slightly different options and features when compared to a typical credit card for non-students.  There are rewards cards, prepaid credit cards, and basic credit cards all intended for student use – which typically means it is easier to qualify for the card than cards that are not specific for student use.

The differences between student credit cards and traditional credit cards vary and are different depending on the issuer, but here are a number of standard differences of a student credit card:

• Higher interest rates
• Rarely a need to have a minimum income to qualify
• Lower overall requirements for qualification
• Credit limit tends to be lower than the same card offered for non-students; although when payments are made on time, the issuers will usually increase the available limit accordingly.

Students generally do not have to look for credit card offers designed for their situation because card issuers spend millions of dollars marketing student credit cards.  Just walk onto any college campus during the first two months of the spring semester and the number of credit card tables set up may astound you!  Students who are new to the “real world” often sign their name to several credit card applications for the freebies they offer  – and end up getting approved for several cards.  Without careful financial discipline, most of these students wind up in debt before they graduate school (and well before they truly understand what that credit card debt will mean to their financial future!)

You can help your college student manage their money and credit card use by teaching them some of the basics before they start spending on their cards.  One of the most fundamental details they should understand is how quickly credit card interest and finance fees can take over – and how long you could be paying back your $300 weekend treat.  They should be using credit card for necessities and only as much as they can afford to pay back when the statement comes ideally – to avoid having to carry a balance from one month to the next.

Remind your young adult child that paying a credit card bill even one day late often results in a late fee (around $30 average), and can cause your credit card interest rate to increase.  Not only can your interest rate increase on the card you made a late payment on, but if the card has a “universal default” policy, all credit card interest rates could increase as a result of making one payment late.

As tempting as the college campus freebies are, make sure your child understands that signing up for cards just to get the free item is a bad idea.  Each time they apply, an inquiry is made to their credit report and the credit score is reduced.  Having too many applications in a short period of time will see the credit score drop quite low – and it’s definitely much harder to repair a low credit score than it is to start out with a good one.

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This entry was posted on Thursday, January 1st, 2009 at 4:11 pm and is filed under Tips & Advice. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.