Should Your Student Get A Student Credit Card?

by : Debbie Dragon

When your child begins college, they are bombarded with any number of offers and good deals, but one that many students are particularly interested in is the student credit card.

These credit cards, offered by most major credit card companies, provide a slightly different package of offers than mainstream credit cards. But the end result is the same - your student can use the cards for a wide variety of expenses and possibly even earn rewards or cash back bonuses.

What makes a student credit card different? Depending on the issuer, there can be a wide array of differences between the cards that are designated for students and those that are sought by others. Let's look at a few crucial differences:

The interest rates are often lower

There is usually no minimum income (and no cosigner either)

Rarely are there any annual fees

The cards are usually fairly easy to get, provided your student hasn't encountered any troubles with credit before

The credit limit might be lower than a regular credit card, at first. But once the student has established themselves as a responsible creditor, the limit will usually rise accordingly

It's unusual for students to have to seek out these credit cards. Credit card company representatives often appear on college campuses, particularly at the start of each semester, and offer "freebies" or other incentives if the student simply applies. And here's where the trouble comes in. Many students, who before have never had credit, often apply for more than one card, get approved for more than one card, and quickly find themselves in debt.

This can be dangerous; to think of a student falling into debt before even graduating college, but it's fairly common. If your student is heading off to college, you can give him or her some tips for using a student credit card. These might include:

Only use the card for necessities, not for party supplies or dining out.

Pay the bill in full each month (you might want to oversee this for a few months to make sure your student is being responsible).

Remind them that if they pay the bill late, they might be hit with a higher interest rate.

Try to discourage them from applying for credit cards simply because they want the freebie - whether that's a Frisbee or a gift certificate for dining out.

Teach your child some basics of good money management

Now, if your student is willing and able to handle the credit card responsibly (or you plan to pay the bill), there are many advantages to acquiring a student credit card. In fact, for many students, using the student credit card will be preferable to using a standard credit card. The advantages include:

The lower interest rate can mean slightly lower payments if you must revolve the balance for a month or more.

Getting a credit card in their name can give many students a sense of independence and responsibility.

Students have the opportunity to develop good credit habits and a good credit rating before they even graduate college.

If you're the parent, it can give you peace of mind to know your student has a credit card to use should an emergency arise.

If you acquire a credit card that offers rewards, your student can use the card to purchase books, groceries and other supplies and quickly earn rewards.

You can keep your student's credit use separate from your own, since no cosigner is necessary.