Teaching a child the importance of being smart with money is one
of the most important life-lessons that parents can pass on to their
children. Understanding credit and debt
is essential for individuals from all walks of life; anyone from
the future Fortune 500 CEO to the aspiring Grade School Teacher
will need to understand credit and debt in order to function properly
and successfully in today's society. Mastering credit early in life
can lead to a lifetime of financial success. Conversely, a bad start
in the world of debt and credit can lead to many years of struggle
and financial hard times. A person's credit history will affect
his or her ability to get a good job, rent an apartment, buy a car,
buy a home or get any other type of loan.
A great way for a youngster heading to college to get a start in
the world of credit is by getting a student credit card:
Student Credit Cards: What's The Difference?
is the difference between a student credit card and a standard
credit card? Not much! In fact, the only real difference between
a student credit card and a regular
credit card is that student credit cards have higher interest
rates (i.e. the annual percentage rate or "APR") associated
with them. This is to be expected since issuing a credit card
to a young person with little or no credit history translates
to increased risk for the credit card company. Also, with student
credit cards, you may be required to provide the name of your
college or university on the credit card application form.
Student Credit Cards: The Advantages
- Emergencies: In a college
atmosphere, an emergency can happen when you least expect it.
Having a student credit card handy can really be a real life
saver for emergencies like disabled vehicles or needing some
cash for that taxi ride home from a party.
- Learn About Credit: A
crucial life lesson which can have a huge impact on a person's
overall quality of life. A student credit card is a big responsibility,
and if a student can learn to handle one responsibly, it can
give parents great comfort in the knowledge that their child
is ready for the real world of money and finance.
- Track Spending: Students
can effectively track their spending by reviewing and storing
the monthly credit card statements that will be sent by the
credit card company. This will help students understand the
importance of budgeting and record keeping.
- Reduce Cash Worries: A
source of a little extra peace of mind: carrying around a student
credit card means that you don't have to carry too much cash
in your wallet or purse.
Student Credit Cards: The Drawbacks
- High Interest Charges:
The interest charges on outstanding balances are invariably
higher with student credit cards due to the increased risk for
the credit card company. And the interest rate on a student
credit card can soar to over twenty-five percent (25%) if you
miss a payment.
Establishing a credit history will require some compromise,
but you can always cancel a student credit card once you've
graduated; the credit history you will have developed will enable
you to get a standard
credit card with a much better interest rate (APR.)
- Easy to Get Carried Away:
Most working adults understand how easy it is to get carried
away with credit cards and quickly end up with a mountain of
debt. Most students, on the other hand, don't realize how easy
it is to get carried away with spending, and often end getting
into serious debt problems, problem that can sometimes lead
to leaving school before earning a degree.
Understand that using a credit card is the same a spending cash;
it's a loan from the credit card company that you have to pay
back. Use your student credit card wisely and sparingly. Only
buy goods and services that you can realistically afford.
Student Credit Cards: Tips
- You Only Need One: To
establish a credit history, a college bound student only needs
to get one student credit card. Though extending credit to a
young student means increased risk for a credit card company,
these companies will often give you a credit card even if they
know you already have one or more student credit card in your
wallet. Resist the temptation of getting multiple cards.
Having multiple student credit cards means that it will be much
more difficult for you to stay on top of your payments, thus
increasing the risk that you will miss a payment (default.)
- Don't Miss Payments: If
you miss just one payment it can cost you dearly. A single missed
payment will be a part of your credit history for seven (7)
years and there is nothing you can do to have that negative
mark removed prematurely. And with most credit card companies,
missing a payment gives the credit card company the right to
raise your interest rate (APR) to twenty-five percent (25%)
or higher. In the long term, such a high interest rate will
end up costing you a lot of money, money that you could
have saved by staying on top of your monthly payments.
- Pay The Full Balance Due:
or at least pay more than the minimum amount due each month.
Paying the specified minimum amount due will end up costing
you a lot more in interest
charges in the long run. Depending on the terms, paying
the minimum amount due can end up keeping you indebted to a
credit card company for up to a decade or more.
- Shop Around: More and
more credit card companies are offering student credit cards
these days. This is great for the credit consumer because all
that competition means you can end up getting a excellent credit
card deal; you may even get a deal that greatly exceeds your
- Examine Your Bill: Review
and scrutinize your monthly statement thoroughly and make sure
that all the charges that have been posted to your card are
correct. If you notice any activity that shouldn't be there,
call the toll free phone number on the back of your card immediately
so that the credit card company can disable the card and issue
you a new one. With most credit card companies, you won't be
responsible for any charges you didn't make.
- Let Your Student Credit Card Provider
Know When You Move: You can avoid all kinds of fees
and charges by making sure that your credit card company knows
when you've moved to a new location. You can't expect a credit
card company to know when you've moved; it's up to you to keep
your student credit card company apprised of your current address.