How Does a Student Credit Card Work?
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Students and Credit
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Most students will apply for credit cards at some point during their time in high school or college. They may be learning money management or simply need access to money that is not currently available. Student credit cards are a great way for young people to enter the world of finances in a relatively safe manner. The cards typically have low loan amounts and may even come in prepaid versions to eliminate the student's ability to rack up a large debt. For students at colleges and universities far from home, credit cards may be a necessity. Many unforeseen expenses may arise like food costs, entertainment, extra books, bus tickets and much more. Parents may find it difficult, if not impossible, to repeatedly transfer or send money to their child. Credit cards offer another option that can be easily monitored if the right card is chosen.
How to Get A Student Credit Card
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Most college and university students will be inundated with credit card offers shortly after graduation from high school. Credit card companies recognize that college students are an easily accessible group of people who may want or need credit cards. However, it is important to pay close attention to credit card offers before applying for a card. To simplify credit card use, obtaining a student card through the student' s bank is often a good choice. Many banks now use on-line banking, which would allow the student to view the amount of money in her bank account in conjunction with her credit card debt and balance. Generally she can also pay her credit card online with the same website that she uses to view her checking and savings account information.
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Card Features to Consider
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Several factors should be considered prior to applying for a student credit card. First look at the card's APR (annual percentage rate). This number reflects the percentage of interest that the card holder will pay for purchases made with the credit card annually. The lower the APR, the less interest that accumulates on a credit balance each month. However, read the card offer carefully, as many companies will offer low introductory interest rates, but will raise the rates after a period of time.
Another important consideration is the credit limit. A high limit may be appealing, but can easily lead to overspending. Initially it's best for students to choose a card with a low credit limit (approx. $250-500) and learn to handle that small amount before upgrading to something larger.
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