College Student Credit Cards: Making the Right ChoiceThe idea of a college student credit card is an appealing one both for the students and often for their parents. Students can use the card to make purchases they may not otherwise have been able to afford; parents can be comforted knowing their child has something to protect them in case of a financial emergency. However, parents and students need to understand what to look for when choosing a credit card.
Students need to be careful when selecting a credit card. Often they are bombarded with direct mail offers or solicitations on their college’s campus. These offers can be tempting, but they aren’t all created equal.
For example, the grace period length varies from card to card. The grace period is the amount of time that passes between a purchase being made and when it begins accumulating interest. Some cards have grace periods of up to 30 days, but the average is around 23 days. However, some cards have no grace period at all which means users will pay considerably more interest, even if they pay their balance in full each month.
Potential credit card holders also need to know about additional fees they may end up paying. The two biggest are late and over-the-limit fees. All of these fee amounts vary from card to card, as do the details about when and how they are charged to the account. For instance, some credit card companies charge over-the-limit fees of as much as $35 when an account goes over the limit by as little as $1. Late fees are generally around $25 for most cards, but some cards offer a leniency period which provides a few days past the due date for the payment to made without a penalty being incurred.
Late fees can also sometimes lead to a higher interest rate. Most companies will increase rates to between 25 and 30% for card holders who are late on payments one or two times during a year.The Negative Impact of College Student Credit CardsWhile building a solid credit history early is important, credit cards may not always be the best option for students. Most college freshmen tend to double their credit card debt by the time they prepare to graduate from college, according to the Adventures in Education web site. This means that a good portion of those students may have already or will soon have late or missed payments which could detract from their credit history.
Furthermore, students don’t realize that having multiple credit cards, even if payments are made on time, can make it difficult for them to get other types of credit after graduating, especially if their income is low. Lenders look at the debt to income ratio, as well as credit history, when decided whether to give out loans.
Plus, bad credit reports can hurt students’ chances of obtaining some types of employment. For example, banks rarely hire people who have bad credit histories or who have filed bankruptcies.More information about fees, grace periods, and other college student credit card information can be found at the Truth About Credit web site.