Overview of Credit Cards for College Students
To help you decide as a student whether you should be getting a credit card or not for college -- I intend to give an honest, informative and brief account (and a rather 'tongue in cheek' approach -- as everyone will be different) of the advantages and disadvantages of credit cards for college students. However, firstly for those who don't know exactly what a credit card is? -- It is a payment card that simply allows the user to purchase goods and services on credit , (with an interest charge) without the need for actual physical cash.
Many feel that credit cards should not be viewed by students as simply an alternative 'approach' or 'option' for the getting of more money (and debt) -- after you have 'maxed out' your student overdraft -- and have eventually run out of your student loan and personal savings. Credit cards can be dangerous -- they have the potential to be seriously detrimental to a student's personal finance if they are not used in a mature and sensible manner. They are however, becoming increasingly harder to get hold of for students, often needing co-signing agreements from parents (and adults) or a pre-paid style credit card. On the other hand credit cards can't be considered all bad -- as they do also pose some useful and positive aspects for university students (as detialed just below).
Advantages of a Credit Card for Students
1. A Financial Education - I believe one of the more 'unnoticed' and certainly more positive aspects to come out of students having and using credit cards is the.. almost 'forced' financial education which is thrown upon them. Suddenly, they have to start getting 'money smart' and start to hopefully become financially organized otherwise literally pay the consequences. For example, they learn through experience and strategy that it pays to 'pay off the card in full at the end of the month' and that it is not a great idea to 'exceed your credit limit' -- otherwise may be liable for a nasty fine. Essentially a credit card for a student can be a great form of financial education for future adult life in that 'big bad world'. Find out how to learn the Credit Card Game.
2. Independence .. and Inner Confidence - another (perhaps subjective) potential benefit of students owning a credit card -- which ties into the above point on some levels, is the greater sense of 'self-reliance' that the student will receive and with that perhaps a greater sense of inner confidence. It takes a certain level of maturity to own and use a credit card properly -- a certain 'adult type behaviour' -- which can promote an awe of self achievement to a student by having to be responsible for a credit card. Furthermore, students can be assured to be more confident when purchasing with a credit card as credit cards come under a more 'protected' scheme.
3. Convenience (and Potential Emergencies) - a scenario in which a credit card comes in most useful is where the student is in need of money urgently (and doesn't have the immediate cash available) -- where sudden expenses may arise such as the need for a new set of academic study books and equipment. Moreover, often student credit cards often come with the benefit of certain promotional discounts on a range of varying student goods, that students should look out for.
4. Build up of a Positive Credit History - another major benefit of credit cards for college students is the opportunity to build up a 'good' and healthy credit history (through making purchases on the credit card and then being sure to pay them back within the 'specified period'). By building up a healthy financial credit history -- a range of advantages can be gained for the student -- such as the ability to buy a car and a house with greater ease. So it is also important for a student to realise the importance of what a credit card can do for them -- if they approach it with the 'right' attitude.
Disadvantages of a Credit Card for Students
1. Build Up of a Negative Credit History - building a credit history works 'both ways' -- if you are building a good positive credit history then you can potentially gain from all the advantages (as described above in point 4) -- however if you have a poor credit history this can harm a student's personal financial sitatuion in the future. If they have missed payments and broke the credit card rules etc. this can potentially cause a student to have a poor credit rating and will be looked upon negatively in the future when applying for a mortgage on a house for example (which is probably deemed a lot more fundamental in terms of financing for the future) -- compared to if they didn't even have the credit past in the first place.
2. Paying the Interest Charge (& Dealing with Debt) - for those who are unsure of exactly what an interest charge is -- it is (usually) a percentage of the amount of money borrowed on credit that has to be paid back to the creditor, in addition to the money borrowed. Although student credit cards are usually lower -- it really still isn't cheap, often being billed in double figures -- and if this starts to 'compound' a large amount of debt can racked up fairly quickly!
3. The Credit Card Rules & Restrictions - there are also many (and they are often pretty strict -- even for a student credit card) rules that one has to abide and obey by when using a credit card, these obviously usually range from bank to bank and to the individual and their, but it is important that the student is fully aware of them. Such restrictions include the actual credit limit (the way you are fined for going over that limit), when it has to be paid back by etc. -- you will find a lot of them in the 'fine print' and it is important that a student is brushes up on them well.
4. Even MORE Debt! (& Keeping Control) - the simple fact is -- with a credit card you are simply getting into more debt -- being a student you may already have your huge daunitng student loan which is coupled with the factor of your student overdraft. Then having a credit debt on top with a painfully high interest rate -- isn't really what you need. Moreover, with the factor of a constant battle between having 'no money' and having the ability to get a luxury right there and then can also be difficult for a student to battle with.