Credit Card Information for Students
Credit cards are popular with students, who begin applying as early as high school and continue using the cards through college and beyond, according to Nellie Mae, a division of the Sallie Mae Student Loan Company. Nellie Mae reported in 2005 that 91 percent of all college seniors had at least one credit card, and 56 percent had four or more. The average balance for seniors was $2,864, Nellie Mae said.
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Expert Insight
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In a 2001 report, The United States General Accounting Office (GAO) concluded that credit cards are generally advantageous to college students, especially for those who manage their credit responsibly.
Benefits
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The GAO said in its report that students want credit cards for the convenience and to establish credit. The agency said students enjoy the convenience of being able to use credit cards for making purchases they might not otherwise be able to afford, for cash advances, shopping online and as an instant source of credit without needing to fill out forms or undergo a credit check. Students also find the cards useful for unexpected car repairs, flying home for a family emergency and managing living expenses while waiting for financial aid checks to be distributed. Students signing up for credit cards often are eligible for special awards programs affiliated with the cards. The programs are tied to the amount of spending on the card and can lead to cash rebates, free magazine subscriptions, discounted airline tickets and more.
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Significance
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The student market is important to credit card issuers who see students as an opportunity to grow market share and increase profits, according to a 2008 study published in Contemporary Issues in Education Research. Three researchers at Southeastern Louisiana University wrote that college students are heavily targeted by credit companies in a variety of ways, including booths near campus, T-shirt giveaways, social networking and email. The researchers said the marketing efforts could be directly tied to rising debt levels among students. In 2009, Congress passed The Credit Card Accountability Responsibility and Disclosure Act, which banned credit card marketers from giving away free gifts directly on campus.
Types
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Secured and unsecured credit cards are available for students, with some companies issuing cards to high school students as young as 16. Secured credit cards require a deposit in a savings account, which is used as collateral for the card. The credit line is generally 50 to 100 percent of the amount on deposit, which is frozen while the card is active. Unsecured cards do not require a bank deposit. Federal law requires borrowers under 21 to show income and an ability to repay before being granted a card unless it is a parent's account. Students who do not meet those qualifications can qualify by having parents co-sign. Initial credit lines for unsecured student credit cards are usually a few hundred dollars, but they may be increased over time.
Warning
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Students who begin compiling credit card debt as early as high school may find themselves deeply in debt by the time they graduate from college, according to the GAO. The agency said the students could begin experiencing significant financial hardships as soon as they take their first jobs and have to possibly begin repaying college loans in addition to the credit card debt and and other expenses.
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References
- Photo Credit credit cards image by Andrii IURLOV from Fotolia.com
