Student credit cards
Student credit cards serve a number of useful purposes. For one thing,
they help to establish good credit if used wisely. Without a credit
record, it is difficult to be accepted for a regular credit card.
Building up a good credit record with a student credit card will make it
easier later to qualify for a regular credit card with a low APR.
A student credit card can also be a teaching tool for parents to help children to take responsibility and to understand good credit practices. People of high school and college age often have little experience with credit of any type. Their transactions usually have been for cash or check. Credit cards sometimes give the appearance of free and easy purchases…until the bill arrives. And that's their biggest drawback.
They usually carry a high APR, so carrying a debit balance on them can be costly. Citi Platinum and Citi mtvU Platinum Select Visa card for college students both carry a regular APR of 15.99% and a cash advance APR of 20.99%. Discover Classic Student Card has an APR equal to prime plus 9.99%. In May of 2005, that was 15.74%. The APR on cash advances was 22.99% plus a 3% cash advance fee.
Some need a co-signer
Some cards require a parent or legal guardian to co-sign. If the student gets into a jam, the co-signer is responsible for paying the bill. Student cards typically have lower credit limits along with the higher interest rates, because they usually have no track record of financial management and the default rate tends to be higher than that for standard cards.
A student credit card offers the advantage of a simple way to pay for things like books, but it's just as simple to buy beer with one. And that's the difficulty. It's easy for inexperienced young people to get carried away and find they have high-interest credit card bills to pay on top of student loans. It can be too much for many.
Those who find the temptation to overspend too great might want to consider a prepaid credit card.
First card often a keeper
Many students report they get their first credit card following offers in the mail, or through the bank with which their parents deal. But, as banks know, a student's first credit card is usually kept for many years, either out of loyalty or out of inertia. It makes sense, then, to choose a card that will stand the test of time during an age when circumstances tend to change rapidly and dramatically.
Student credit cards serve a useful purpose if used properly, but borrowing cash with them or carrying a balance is costly. The advantage to this is that there is more of an incentive to use them wisely.