School is over and you are looking forward to a nice trip to your new college
for higher education. This would be the first time you will be living independently
away from your parents. At this point in your life you need your parents the most
to assist you greatly with educational fees and personal expenses. Sometimes parents

open credit card accounts or
a companion card bind with their own personal accounts. The most open choice available
to any student however is student loans in the form of
student credit cards.

What is a student credit card?

A student credit card is specially designed for students to finance their education. They resemble the normal credit card except for the following differences;

Co-Signer

Most of the student credit cards require parents to cosign. In case borrower is unable to pay back the borrowed money the cosigner stands responsible for the repayment. When this option is required by the credit card company then parents are in control of the limit for the student credit card.

Credit Limit

Since students have no credit history
at all, so when they apply for these credit cards they are give a low limit.
This limit usually ranges for $500 - $1,000.

Higher Interest Rate

The student credit cards have a high interest rate and other conditions that don't favor the students. The reason behind this is that they have a higher default rate then the adults plus the banks don't want to incur losses from the student credit cards. What they do is that they spread higher interest rate over the student credit card community to minimize their losses. Incase student defaults, the lenders already have generated more than the money they lent as profits from the entire student credit family as compensation or as profits by the interests.

Why do credit card companies court college students?

Credit card companies have found another way to earn millions of dollars. They have started giving students credit lines. Companies spend huge amounts to market their cards for two reasons. First they want students to carry their card when after they finish their college. Secondly they are very good customers not because they pay on time but because they are unable to do so. Since they have material expectations, show more response to low-cost marketing and have future demands for services they pile up debt and that's what the credit world wants.
Student credit card companies and banks earn extra money in the form of higher interest rates on revolving debts, annual fees and late payments fees. Students are also considered good customers because when they are unable to repay they try to get money through newer loans, form parents or part time jobs instead of bankrupting student loans.

Financial education

A student must be aware of all the terms such as credit
score, credit reports when
he enters the practical financial life. They must know how to protect their identity
from theft and how to avoid scams. In
case of higher debts before adopting credit
counseling, or debt settlement
they must have appropriate knowledge of each.



If students use their credit cards wisely and only restrict them for educational expenses or emergencies they will enter the practical life with very small repayment amounts. This will not put any extra burden on their shoulders. They must also be very careful in selecting a card and read the terms and conditions of the student credit card company before signing up.