Student Credit Cards: Benefits and Dangers
Every year, college freshman are bombared with offers for
student credit cards. Parents need to talk about in talking
about the responsibilities that go with having a credit card,
before their son or daughter goes off to college.
I'm not suggesting that it's a bad idea for college students to
have their own credit card. Actually, it has many benefits, but
it is essential that they get the right card and use it
carefully and prudently.
The benefits of a student credit card are clear. Parents won't
need to be continually sending money and students will be able
to make normal purchases more easily. They will also be prepared
for unforseen "emergencies." Moreover, since most credit cards
have a preset spending limit, parents can be sure that spending
will remain within a pretermined amount. Parents should remember
to request a relatively low spending limit, since credit card
companies are often too liberal in the spending limits they
assign to student credit cards.
Parents may wish to have the student credit card used only for
emergencies. In that case, this must be made quite clear to the
student.
Some credit card companies offer very low "teaser" rates in the
beginning for a limited period of time and then jack up the
interest rate to an exhorbitant level afterward. Always check
out the interest rate that will apply after the introductory
period.
Another pitfall to avoid is paying only the minimum payment each
month. Often, the minimum payment only covers the interest for
that month, and little or no money goes toward paying the
principal. In that case, it may take decades to pay off the
balance. In fact, if no money goes toward the principal, the
balance will never be paid off!
Many credit card companies offer the ability to manage the
account online. This is a very convenient feature. Students can
check their balance or make payments from their checking account
24/7.
This feature also allows parents to monitor the account, even
from thousands of miles away. This level of accountability adds
an extra margin of safety and reduces the chances that the
student will get into trouble by over-using the credit card.
To apply online for a student credit card, go to Credit Card Info
Guide