A College Student Credit Card and Debt Survival

Paying your Debts off with a College Student Credit Card

Entering college is both exciting and daunting since it’s the start of your journey to adulthood. College actually opens up a lot of opportunities like finally being 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 in their children’s name or provide them with a second card on their personal credit card account. Parents do this in anticipation of some future emergency that their children might meet or if ever they failed to send their children’s monthly allowance at least the card can help their children in purchasing for the meantime some of their needs.

Another financial assistance available for students is the student credit card which is issued in their own names.

What is a student credit card?

It is a type of credit card that is designed for high school and college students. These cards function in the same way as any credit card issued by any financial institution. However, they have a few restrictions.

Some of the restrictions are as follows:

1. Some issuers require for a parent or guardian to co-sign meaning that the student’s parents must agree to be the guarantor in case a student fails to repay part or all of the outstanding credit card balance. This is advantageous in some point since parents will have the control over the limit of available credit to be given to their children.

2. A much lower credit limit is provided to students. Issuers are aware that students have very limited sources of funds that is why they also offer a lower credit limit. Aside from that, students don’t have yet any credit history so issuers don’t have any basis in terms of their capacity to pay off debts. A low credit limit is provided to get students started building their own credit scores and the same time limiting the risk of loss of the issuer of the credit card.

3. The interest provided for student credit cards are much higher. This is the issuer’s way of decreasing their risk of loss. The higher interest provides a way for credit card issuers to spread the losses over the entire student credit card population.

Why student credit cards are important?

Student credit cards offer great benefits if and only if responsibility is practiced in the using 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 significant role that credit history will play in all their future endeavors.

Before signing any credit application or contract, a student needs to understand that they are fully responsible for paying the bills. Here are some rules of credit management that aims to guide you in avoiding future credit card problems:

1. Try to read carefully all information written on the application most especially the fine print because some of the important points of the application are stated there.

2. Before you sign for a credit card try to consider other options like debit cards. For debit cards, money are directly deducted from your checking account so can’t spend 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 submit yourself to an ever increasing accumulation of interest charges that will haunt you even after you graduate. Remember that when it comes to credit cards, it’s just not possible to run away from your debt.

4. For your sake please avoid impulse shopping which tends to max out your credit card.

5. Make use of your credit card only for emergencies. If you are planning on using your credit card to pay off your spring break vacation then be prepared to pay the price because it’s sure going to be higher than any waves you experienced on the beach.

6. To avoid temptation, it is much better if you refrain from always carrying 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 get to keep other charges to a minimum. Aside from that, some banks provide discounts for early payment that provide additional savings for you.

And lastly by using your student credit card wisely can help you in establishing a strong credit history that can lead to good mortgage rates and lower rates on some of the future loans which you are likely to apply for like car loans, housing loans and other types of loans.

Jo Williams has an interest Home & Garden related topics. To access more information on high school student credit card or on student visa card, please click on the links.

Student Credit Card Debt: A Survival Guide for Students

College is the last care free step before real life begins, or at least it should be. Students should be able to go to sleep each night with the only pressing responsibility being the English exam tomorrow morning. They should still get to live in a world where although they can’t afford much more than the occasional late night drive through Taco Bell or downloading the latest hit single, at least they aren’t worrying yet about paying a mortgage, most forms of insurance, utility bills, or the college loan that is allowing them to get an education.

Unfortunately, for many college students this is not the case. Many are already burdened with financial pressure because they are accruing credit card debt, in some cases over $7,000 worth of it. Increasingly, students are even coming to campus with credit card debt in hand. Consolidated Credit Counseling Services Inc. reports that 20% of freshman got their credit card in high school and nearly 40% sign up for one in their first year at college. With the abundance of on-campus, mail and Internet card offers giving low introductory rates, freebies, and bonus airline miles, it’s not surprising to find that according to a 2001 Nellie Mae study 83% of all undergraduate students have at least one credit card and carry an average balance of $2,327.

The problem of high credit card debt has many implications for a student. Some end up dropping out of college all together so they can work full-time just to pay credit card bills. If they are able to stay in school, but have in the process ruined their credit rating, it can affect their ability to rent an apartment, afford insurance and even get the job that will help them to pay off their debt. Even relationships suffer as a result of financial stress. There is also a psychological affect on students. The stress can lead students into depression, and in a few cases has been a contributing factor to suicide.

Of course it hasn’t always been like this. According to Dr. Robert D. Manning, Professor at Rochester Institute of Technology and author of Credit Card Nation, in the late 1980s student credit card limits were around $300-$500 and parents were required to co-sign. But when credit card companies began making a lot of money during the 1991 economic recession, they started looking for new markets and found it in the student population. Issuers dropped the co-signing requirement and started raising limits, which, when combined with parents’ increasing financial pressures and higher costs of education, gave students a way to fund themselves through college.

And students are an easy market to tap into. In his article “Credit Cards on Campus,” Manning writes, “Credit card companies encourage fantasies of easy money because students are so profitable: teens have financial naiveté, high material expectations, and responsiveness to relatively low-cost marketing campaigns, high potential earnings, and future demand for financial services.”

Credit companies advertising to the vulnerabilities of young students is not the only factor that goes into the current trend. Most students simply have not received the education in personal finances and credit card management that they need to meet the onslaught of offers. According to Consolidated Credit Counseling Services, Inc only 15% of high school students take a personal finance class. And, according to the Jump$tart Coalition for Personal Financial Literacy, a non-profit organization which promotes financial literacy at the K-12 level, parents for a variety of reasons are not talking to their children about the privilege and responsibility that goes along with using a credit card.

Dr. Carol Carolan, Executive Director and Founder of the Center for Student Credit Card Education, says that the single best thing parents can do to help their children avoid the pitfalls of credit card debt is educate them. Parents need to talk to their children about it early on and regularly. Dr. Carolan suggests the following tips for parents.

Experts don’t all agree on the appropriate age for a first credit card. Dr. Manning, for instance, argues in his article Credit Cards on Campus that having them at an earlier age may actually result in fewer debt problems later on.” Other experts argue that waiting until the junior or senior year in college is best. The bottom line parents need to realize is that once students reach the college campus, they will be inundated with credit card offers and will be able to get a card regardless if they are supported financially solely by their parents.

And talking with students involves more than mere calculations of fees, interest rates, and balances. Students need to understand the messages they receive through advertising, the difference between a want and a need, as well as the lure of money. Give students a healthy, realistic perspective of money and material possessions and they will be better equipped to make wise decisions.

Universities and colleges play a huge role in the current trend of high student credit card debt. Some invite credit card issuers onto campus because they receive revenue as well. But others are starting to recognize the problem and are restricting the activities of credit card companies on campuses. Manning states in his book Credit Card Nation, that “During the academic year 1999-2000, over 400 colleges and universities formulated official policies against on-campus credit card marketing and nearly 600 other schools are considering similar restrictions.”

Some institutions like Rochester Institute of Technology (RIT) and the University of Central (UCA) Arkansas are even beginning to require classes in personal and consumer finances. Mary Ann Campbell, CFP, professor of personal finance at UCA and professional speaker with Money Magic, Inc., has a mission to educate students, educators, and adults about money. She is currently working on her dissertation about college students and credit card debt. Campbell is researching the best methods of reaching college students through a high impact presentation warning them of the perils and privileges of plastic. Like other experts, Campbell is not against students having credit cards. In fact, she says it is easier to get one as a student and can help them build the good credit history needed after graduation. But students do need to be educated. Campbell gives the following tips and reminders for students.

Credit cards can be an invaluable tool for a student. While providing security and convenience, if used wisely a student will build the good credit rating that is needed to secure other consumer loans, jobs, and lower insurance rates after graduation. Dwayne Blew, a member of CreditBoards, a forum dedicated to credit issues, is one example of a student who didn’t buy things he didn’t need and paid his credit card balance in full each month during college. Now he is reaping the benefits of a good credit score. Dwayne says, “One of the reasons you’re going to college is to improve your lifestyle once you graduate. After putting so much effort into school, why let something small like a credit card end up ruining it all?”

Many excellent resources exist to help students both avoid and get out of the credit card debt trap.

The financial decisions students make in college have a long lasting impact on their future. They are learning how to use and manage various financial tools vital for life in the “real world”. When used wisely, credit cards are one tool that can open the doors for a life unencumbered by financial burdens.

Amy L. Cooper-Arnold has been a staff writer for http://www.cardratings.com/ since 2004. Her articles have been republished by respected publications throughout the country, including Young Money Magazine, E/The Environmental Magazine and About.com. Amy recently graduated with honors from Austin Peay Univ. and is currently taking graduate-level classes.

A student loan debt consolidation loan allows you to combine your federal student loans into a single loan with one monthly payment. The repayments of a student loan debt consolidation loan can be significantly lower than the payment required under the standard 10-year repayment option.

For American students, the U.S. Government came up with a plan that can help a student manage their student loan debt. The plan they came up with is called a Federal Direct Consolidation Loan. It doesn't matter if you're a recent graduate student, well into your career already, still at school, or in your grace period for repayment of a student loan. For any of those student categories, a Federal debt consolidation loan may be applied for.