The Differences with a Student Credit Card
College students have access to something that no one else does and that is student credit cards. Unlike traditional credit cards, which are typically only available to those with jobs and full-time incomes, student credit cards are marketed towards those currently enrolled in school. The providers offer more lenient requirements because the students have less income than working people.
Often, the companies market the cards at college campuses. They set up stands at financial fairs, run booths at campus hotspots and go door-to-door in dorms, sororities and fraternities. Companies typically offer some type of incentive for applying for a card, such as a tee shirt, hat, or stuffed animal.
Student cards are different from traditional cards because the cards often lack application fees. You fill out a short form, listing your name, address, school and any income and submit it back to the company. Most companies respond within a few weeks or less. The cards also reduce the minimum amount due every month, as most students do not have full-time or even part-time jobs.
As a student, you do not have access to the same benefits as you would with other credit cards. For example, the card might have a lower credit line than you would get if you worked full-time. The cards typically have a high interest rate, especially when compared to other types of credit cards.
To wrangle new customers, the issuers might offer a card branded with the school`s logo or mascot, or offer a card with a low introductory rate until graduation. The company hopes that by grabbing younger customers, the customers will stay until they make a full-time income. The money you spend on the card during college carries with you, earning the company even more money.
Opening up a line of credit during your college years has the potential to ruin your future self. As a student, you have little to no experience with credit. You might not realize that the low introductory rate changes faster than you thought and sometimes only lasts a few months. Once the rate increases, your minimum payments go up and you may not afford to pay off the debt.
Unscrupulous companies hook college students by offering low rates and large lines of credit. By the time your first payment comes, your minimum payment skyrockets past what you can afford. Some companies have even faced fines and penalties from the government for their actions. For example, the companies offered multiple credit cards to a single student, then called and harassed the student into paying back the money.
Be smart when it comes to getting your first credit card. Avoid any fun incentives the provider offers and read the paperwork carefully. Use a credit card comparison tool, which lets you compare the interest rates and other factors with multiple student card providers. Look for a card that comes with a low interest rate, lenient repayment terms and those without additional or hidden fees. Something as simple as a card that offers one or two free late payments a year is a benefit to you. The right card helps protect your future.
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