As its name would suggest a college credit card is simply a credit card which has been specifically designed for college students and which is perhaps more commonly known as a student credit card. The idea behind student credit cards is that they allow students to learn all about credit cards and to experience the benefits of credit cards early in their lives. In effect, a college credit card is an introduction to the world of credit cards and, although s student may have had experience of using a supplemental card on a parent's credit card account, represents the first credit card which the student will have in his own right.
To all intent and purpose college credit cards operate in exactly the same way as normal credit cards but there are a few differences which you need to know about. These differences arise because the credit card companies are taking something of a risk by extending credit to people who will generally not have any credit history and thus need to protect themselves from the increased risk of debt on student credit cards.
The first important difference is that the credit card companies require a parent or guardian to co-sign the student's application for a card, so that the parent or guardian is aware that the student is applying for a line of credit, and will also require the parent or guardian to stand as guarantor for the account. In other words, if the student defaults on the card then the parent or guardian will be legally liable to make good on the debt.
The second difference with a student credit card is that the credit limit is set at a lower level than that seen on normal credit cards and typically at between $500 and $1,000. This limit is also set at a reasonably low level because this is considered to be sufficient to meet the needs of the vast majority of college students.
Finally, the credit card companies also offset their risk by setting the interest rates on college credit cards (the card's APR) higher than normal to try to stop students from overspending on their cards and to encourage them to keep their spending within the amount which they can afford to pay off each month.
On the surface college credit cards may not seem very attractive to those of us who are used to using normal credit cards but in fact they can be a very useful tool for teaching youngsters to handle credit responsibly and have the added benefit of providing students with the ability to build up a good credit record, which they will find very useful once they leave college.
College is a very expensive time for most students and there are very few students who will make it through college without a mix of parental support, grants and scholarships, federal loans, private loans and a part-time job. This is hard enough in itself to manage and all too many students have problems coping with this and end up having to refinance their loans, often through student loan consolidation. If we now add a credit card into the equation we might just be providing the straw that breaks the camel's back for some students.
Whether or not college credit cards are a truly good idea or simply another marketing ploy by the credit card companies is something which you must judge for yourself but, whatever your view, they are certainly something which must be approached with both eyes open.
