College Student Credit Cards
College is the place where most of us get our first taste of
financial freedom and the responsibility that goes along with
it. Inexperienced with debt, college students may apply for a
cash back credit card thinking that it sounds like a no lose
situation. They hope to charge large ticket items or living
expenses that they cannot afford to buy with cash and then
receive a check for cash back at the end of the year.
Unfortunately, a free credit card offer can appeal to a student
for all the wrong reasons. Instead of building a good credit
base and starting out responsible buying habits, a college
student credit card may be used to live beyond the means of the
average student. This can be a trap for students and lead to
years of credit damage and negative consequences.
The college student credit card
College students receive credit card offers on a nearly daily
basis. They are included in bags with new textbooks, campus
purchases, and student run newspapers. Offers for a free credit
card also come in the mail marked "Pre-approved". Faced with the
idea of a cash back credit card, most students are eventually
lured into replying to one or more of these offers.
In addition, credit card companies, such as MBNA, offer cards
designed to target specific college students. This college
student credit card comes in a design that features the
student's university or alumni association and is appealing for
the sense of belonging and exclusivity it conveys. However, it
also carries some hidden dangers that the average college
student misses in their excitement to get their first credit
card.
Drawbacks
A company that offers a free credit card to college students is
familiar with the sometimes precarious spending habits of the
average student. Payments from students are frequently late and
the minimum payment due is the most some young people ever try
or are able to pay. This delinquency adds up to a lot of money
in interest and late fees that goes to the credit card company
in the form of profits.
Since a cash back credit card offers the incentive of a return
on purchase prices, the interest rates for these cards are
usually very high. In addition, the student applying has little
or no credit and can only qualify for a line of credit by
promising to pay exorbitant interest rates if late or overdrawn.
So in order to lure students into applying, the lender may
advertise a low interest rate for a trial period, such as six to
twelve months. But when the student uses the free credit card,
the balance accumulated ends up costing much more once the
higher interest rate takes effect.
But the most dangerous part of a college student credit card is
the damage it does to the student's credit rating. This damage
takes place long after the purchases have been enjoyed and is
usually not a factor in the decision to make such purchases.
Impulse buys and peer pressure can add up to serious credit
consequences. The average student has no real understanding of
the implications of bad credit, which could follow them into
their careers and family life. They could be denied a car or
mortgage loan, as well as further lines of credit with other
credit card companies.