Getting started college is both thrilling and daunting as it marks the beginning of your adult journey. College actually opens up a lot of options such as being finally able to live independently away from your parents and then being able to budget your own monthly allowance sent by your parents. Most parents open a credit card account on behalf of their children or give them a second card on their personal credit card account. Parents may do so in anticipation of a future emergency that their children might encounter, or if they have failed to send their children monthly allowance, at least the card can help their children buy some of their needs while shopping in the meantime.
Another financial support for students is the student credit card, which is issued in their own name.
What is a student credit card?
It is a type of credit card that is designed for high school and college students. These cards work just like any credit card issued by a financial institution. However, they have a few limitations.
Some of the restrictions are as follows:
1. Some issuers require that a parent or guardian sign up means that the student’s parent must agree to be the guarantor if a student can not repay part or all of the outstanding credit card balance. This is beneficial in some ways because parents have control over the limit of available credit to be given to their children.
2. Students have a much lower credit limit. Issuers are aware that students have very limited sources of money, which is why they also offer a lower credit limit. Aside from that, students still have no credit history, so issuers have no basis in terms of their ability to pay off debt. A low credit limit is provided to get students to build their own credit scores while limiting the risk of losing the issuer of the credit card.
3. The interest for student credit cards are much higher. This is the way for the issuer to reduce its risk of loss. The higher interest rates provide a way for credit card issuers to spread losses across the student credit card population.
Why student credit cards are important?
Student credit cards offer great benefits if and only if responsibility is exercised in the use of the credit card. A student credit card can help teach students responsibility and money management. Learning the benefits of building a good credit rating is important to help students understand the important role that credit history will play in all their future efforts.
Before signing a loan application or a contract, a student must understand that they are fully responsible for paying the bills. Here are some rules of credit management that you want to help avoid future credit card problems:
1. Try to read carefully all the information written on the application, especially the fine print, as some of the important points of the application are given there.
2. Before signing up for a credit card, try to consider other options, such as debit cards. For debit cards, money is deducted directly from your checking account, so can not go beyond your deposited amount.
3. Be sure that when you apply for a credit card, you will be able to repay the debt or else you will just get an ever-increasing accumulation of interest rates that you will pursue even after you graduate. Remember that when it comes to credit cards, it is simply not possible to run away from your debts.
4. For your sake please, please, buy impulse tending to remove your credit card.
5. Only use your credit card for emergencies. If you are planning to pay with your credit card for your spring vacation holiday then be prepared to pay the price because it is sure to be higher than any waves you have experienced on the beach.
6. To avoid temptation, it is much better if you are always on your credit card. Bring it only with you if there is any important monetary emergency.
7. Always try to pay your bills early so you keep other fees to a minimum. Aside from that, some banks offer discounts for early payment, which will provide extra savings for you.
And finally, by using your student credit card wisely, you can lead in establishing a strong credit history that will lead to good mortgage rates and lower rates on some of the future loans that you can probably apply for such as car loans, home loans and other types of loans