While going to college is a good financial choice, misusing university credit cards, while in schools, can cause the student long term financial problems. While having one credit card can be a rational choice for a college student if that card is properly used, many students give in to temptation.
Today half of all college graduates have more than $5000 in credit card debt when they receive their degree, and 25 per cent have more than $10,000. The payments on the cards may represent a sizable portion of the recent graduate’s disposable income if they find a good job. If it takes a while to locate suitable employment, the financial consequences of default can ruin the new graduate’s financial life almost before it has started. Compare student credit cards for FREE with our ZIP code search!
Credit Card Companies Like Student Customers
Credit card companies make more money on unpaid balances than on cards that are paid down every month. Since students are more likely than more experienced consumers to run up these balances, they are a very attractive segment of the consumer credit market. Also, students are young. They have a longer life ahead of them to make payments on credit card debt than older consumers. The companies also know that many parents will bail out students who get in real trouble. All in all, issuing credit cards to college students can be a very profitable business.
Colleges Want Students to Have University Credit Cards
Colleges need money to deliver their services, and tuition and fees paid by students covers only a portion of it. Credit card companies pay for the privilege of advertising to the student body of a college or university. They pay for every on campus table they set up, for every piece of promotional literature that is placed in a student’s mailbox, and for every leaflet placed in a bag at the campus bookstore. Some schools get a fee for every student card that is issued, and some even get a percentage of the charges on those cards. All in all, student credit cards represent a respectable revenue stream for the school as well as the credit card company.
University Credit Cards Are Easy to Get
The threshold of acceptance for a student credit card is very low. While minors, people under 18 years old, cannot legally enter into a contract of any kind, students between 18 and 21 years of age who apply for a card need only do one of two things:
- Prove they have a enough money coming in to make payments on their balance
- Get a cosigner who has enough income to satisfy the company
The credit card companies decide how much income a student has to have to get a card. Their judgment may appear unrealistic, but as long as the student has some income, the company can legally issue a card to a student under 21. Students older than that can be issued cards at the company’s discretion. College students should look over college credit card tips to find the best way to acquire a credit card!
How Student Credit Cards Are Marketed
Credit card companies use any means they can to reach students. They advertise in campus publications and send direct mail offers to on campus mail boxes. They set up tables or booths in residence halls, student union buildings or elsewhere on campus. They even contact students through email and social networking channels.
There is one restriction on credit card marketing on or near campuses: nothing tangible can be offered a student in return for applying for a credit card if the offer takes place on campus or within 1000 feet of its edge. This means students cannot be offered tee shirts, Frisbees or food to sign up, unless the company is about a fifth of a mile away from the school. Beyond that point, such offers are perfectly legal. Even on campus students can be offered intangibles to sign up. This includes things like coupons for things like tee shirts, Frisbees and food as well as credits on their new accounts.
The Pros and Cons of University Credit Cards
A credit card can be a very good thing for a student to have. Many students have low incomes and limited resources, so that saving up an emergency fund can be very difficult. In such circumstances a credit card can help bridge the gap. Having some credit available helps young adults learn to good credit management practices and helps them build credit for the future.
Problems arise when students who are legally adults but whose own incomes are very low are issued cards without the knowledge of the parents who are still supporting them. These young people do not get any information on the vital need to pay the balance when the bill comes each month. Some may not understand the function and implications of interest and the significance of the interest rates on their cards. College should look for ways to lower their credit card interest rates. Very few college students are likely to know the problems that building up a large credit card balance while in school will present in the future. Try our FREE Credit Card Interest Calculator and know the best ways to use your credit card!
Rules for Using a Student Credit Card
While many students use their credit card only in emergencies, others try to build a strong credit history while in school. Those users should establish a set of rules to guide their card use.
Use the card only if the total owed can be paid off when the bill comes. Use it for purchases involving basic needs, such as food, rent or utilities. Also consider using it in an emergency occurs that would otherwise terminate the student’s academic career.
Do not use the card if the purchase is a replacement for something that still works adequately. Do not charge anything on a credit card if it is not needed but wanted. Finally, refrain from charging any purchases that are not already in the student’s budget.
How to Choose a Credit Card for Student Use
Student credit cards should have many of the same characteristics as those for other consumers. in particular, they should have no annual fee. Their interest rate should be as low as the applicant can get after a realistic credit review. A card may still require a cosigner, but the terms are likely to be much better than some cards marketed on campus.
To get the best deal on a credit card students should consider issuers that do not advertise on campus. A local credit union or bank may have far better terms than a card with “university” in its name. In particular, a bank with which the student has dealt over a period of time may be able to offer quite an attractive deal.
Students should study the credit card payments with great care. In particular, they should know that credit cards do not have the grace period provisions of student loans. Payments must be made on credit card depth every month even while the student is in school, and except for large emergency purchases to prevent dropping out the entire bill should be paid leaving a zero balance. Even the charges made in emergencies should be paid off as soon as possible.
University Credit Cards Bottom Line
University credit cards can be a convenience, a means to begin establishing credit and a valuable emergency resource. They can also be a nightmare if misused. A student should leave the card at home unless very certain that it will not be misused no matter what the temptation. Compare and begin choosing credit cards with our FREE comparison search! We are here to help you find the best credit card!
