Wednesday, October 30, 2013
College Student Credit Cards: Types, How to Get, Advantages and Disadvantages
The Most Popular Credit Card Types For College StudentsThese days, credit cards for students have become quite popular as they enable them to get the benefits of cards with low interest rates. In fact, some cards do not even charge any kind of fees. Apart from the benefits, the cards also help the students to build credit. Nowadays, there are a number of such cards to choose from, such as secured, unsecured, merchandise, and prepaid cards. But, you should always choose the one that suits you the most. Along with, you should also keep in mind that credit cards come along with a lot of financial responsibilities. Therefore, you must use them wisely.UnsecuredIt is a kind of card that does not require any cash deposit make purchases from a simple line of credit. This kind of card for student offer limited or normal credit, but is definitely the most preferred option for the students. In fact, it has been designed in a way to help student to improve their credit profile. One more good aspect about this type of card is that it offers 1% cash back as a bonus amount on each and every purchase you make through it. In addition, the card does not come along with any kind of annual membership fee. On the top of that, it even offers an extra 25% reward when the monthly bill is cleared on time. You can redeem the reward through a check or directly into your account. Moreover, this type of card does not put any limit to the amount of money one can earn.SecuredThis is a type of card that fetches money from an account shared by your cardholder. Reliable and good secured cards always submit a detail of your payment record to credit bureaus in order to allow you to build credit. The details of your payment record are submitted to three chief credit bureaus and email or text messages are used to send monthly payment reminders. This type of card usually charges around 20% of annual percentage rate (APR) on purchases, but does not charge any annual membership fees.PrepaidPrepaid cards are quite similar to a secured one and it also includes a checking account. As its name suggests, in this type of card you spend the funds that you deposit into the card. For this reason, the monthly fee associated with this card is quite nominal.Important Guidelines To Help College Students To Get A Credit CardIn earlier days, it was very simple for college students to get credit cards as there were many sources available. There were too many companies who would offer free cards to students by just filling applications. Unfortunately, in February 2009, Credit Card Act of 2009 came into existence and made very strict new rules regarding students to qualify for a card. Now, the rules have totally changed and are so difficult that students find it hard to qualify. Before going to get a card, students are supposed to know many things about the qualification and related stuff, following are few guidelines, you can have a look.· Firstly, study about credit cards, how it works and such other things. Further, you even need to understand the due dates, what are the billing procedures, late penalties, limit fees, how to raise your interest, ways to avoid any additional charges and many other card related queries.· The students ought to be above the age of 21 and should be having a job. The conditions of the new law states that if the student is underage i.e. below the age of 21, he/she has to pay the additional charges from their own income or they need to have someone as a co-signer who is above 21. Further, the law gives permission to pay only 20% of the earnings and not more than that.· When the student wants to raise the credit limit, he/she has to get a written permission from his/her parents or co-signer.· If you desire to get high interest rates or a big line of credit, then you need to require a good credit history.· Comparison of different kinds of card schemes and offers for college students is also an important task. You would find dozens of card companies offering cards to college going students. As no two companies are similar, you would find each company with different set of rules. Interest rates, benefits and charges of each company differ with another. You should take up the responsibility of selecting one company that suits your requirements. Try to find benefits for yourself and try to avoid additional costs using some benefits.· If you do not have sufficient credit, then you can get a different type of credit card known as Subprime credit card. However, they are many additional charges on these kinds of costs. In earlier days of such card, there was around 75% of limit on credit cards, now it is 25%. You can see there's a lot of difference.· While selecting a card, make it a point to check whether your company is reporting to the big credit bureaus or not. Equifax, TransUnion and Experian are the three very big bureaus which would help you in enhancing the credit score at a later stage.· Usage of credit should also be learnt in order to maintain it well. Proper management and control are very important while handling a card.Some Significant Advantages Of Credit Cards For StudentsWhenever a student enters his/her college premises, he or she is flooded with offers from credit cards companies. These cards for students build a feeling of responsibility, make them comfortable and help them to enhance their credit as well. There are many advantages of owning such cards; nevertheless a student has to be very careful in handling a credit card as he/she has to understand about the debt factors of a credit card. We have laid down some benefits of having a credit card with students; refer the following points to know about it.· Responsibility: Students actually learn what responsibility is when they are given a credit card. Money management, paying bills and control in spending are few things that can be taught to students by giving them credit card.· Emergency: Many emergencies happen after getting such card; hence, handling them can be learnt.· Rewards: After purchasing commodities, many students get good rewards like cash or points.· Increase credits: After a student learns to increase his/her credit in a better way, he/she can purchase a car or even a house.· Warning: A feeling of warning and danger helps students to avoid excessive purchases.Some Disadvantages Of Credit Cards For StudentsAfter the introduction of new laws regarding student credit cards, there have been many limitations for students to qualify for a credit card. However, according to some sources it is known that students of today are carrying lot of debts because of the credit card facility. These debts even carry forward after the student leaves college. Besides having many advantages, credit card for student carries a lot of disadvantages too; let us have a look at them as follows.· Too many cards as well as debtors: According to a survey in 2009 done by Sallie Mae, it was found that students are wholly dependent on a credit card nowadays which is not at all a good thing. It is a known fact that about 84% of college students are having the advantage of getting a minimum of one credit card; while the average is about 4.6 cards. Clearly, it means that if a student is having one card, he can spend up to $5000, and similarly he can spend up to $15000 with 3 credit cards. As we know that interest rates are blooming these days, it is quite obvious the debt amount will increase drastically.· Too high balances: This was actually the most problematic situation that came across Sallie Mae; it was that $3173 was the mean balance of credit cards being carried by college students. It was shocking to know that this figure was the highest among all other figures. This shows that students are not using the cards for convenience purpose; instead they are misusing the given advantage and are going beyond their limits.· These cards for students as well as loans: This is also another burdening disadvantage as the debt of the students is carried forward to the coming years which turn into a loan debt. It is very sad that the students have to take the responsibility of paying it just after their commencement of careers. According to Sallie Mae's study in 2009, 23% of the students remained unanswered when asked about their loan payments, while the answers of the other 77% had no connection with the debt loan.· Conditions: After the new legislation was passed in 2010, students below the age of 21 are facing a lot of trouble to qualify for a credit card. The new rules are so strict that it has become a tragic disadvantage for the students.