Student Credit Cards
Student Credit Cards
In today's world, credit is everything. Without a
solid credit history you can't qualify for a mortgage,
a car loan, or a credit card. Or if you do manage to
qualify you are not likely to get the best interest rates.
That's why it is so important to start building a credit
history early. The sooner you start the better, and perhaps
the best way for young people to start building credit is
with a student credit card.
A student credit card is a special type of credit card
designed specifically for young people who are in school
and have little or no credit. They are fairly easy for young
people to obtain, although some may require a cosigner. A
cosigner is a person, usually a parent or guardian, who
agrees to assume the debt in the event the cardholder is
unable to pay. This can be a risky move and could ruin the
credit of the cosigner if the cardholder runs up a large balance.
Fortunately, credit limits for student credit cards are usually
set low. Most are set at around $500. This is because credit
card companies view students as a higher risk since they usually
have low salaries. For the same reason, interest rates are often
a few points higher than standard credit cards.
Of course student credit cards offer more benefits than just
establishing a credit history. They can help teach young people
money-managing skills and financial responsibility. They will
need to learn how to set a monthly budget so that they can pay
their bills on time.
The temptation will always be there for them to use their student
credit card for all sorts of things. But it will be a good lesson
for them to learn that they can not just charge every new pair of
shoes or concert tickets they want. They'll have to prioritize
their spending or they'll quickly find themselves in over their heads.
And if they do miss a payment or go over their limit, they will
learn their mistakes have consequences. But it is better for
them to learn those lessons when they are young and with relatively
small sums of money. And they will be thankful that they learned
the financial skills that they will be using for the rest of their lives.
Ed Lathrop is a successful real estate investor and a series 3 commodities futures broker.
He has extensive knowledge of the credit/mortgage markets. He has built the financial
calculator Website, ezcalculator which is free to use and includes the calculator, "Pay Your
Credit Card Debt Quick." Ezcalculator can be found at Mortgage Calculator or by going to
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