Student Credit Card

The benefits and drawbacks

Finances can be a constant worry for both students and parents; basic living costs, tuition fees and social costs put pressures on the bank account which may feel impossible to cope with. Many people turn to credit cards to help subsidize their income. Credit companies are catering for the student market by offering cards with reduced interest rates. The benefits of these credit cards are:

  • A little flexibility with funds.
  • Students can gain responsibility and trust from parents.
  • The independence given allows the student to grow with confidence.
  • They can learn to manage their money and budget.

On the other hand, the drawbacks to having a credit card include:

  • Being frivolous with money.
  • Getting into debt early on in the student's college life, and carrying this debt throughout their studies or beyond.
  • Trying to impress friends by flashing cash is also a danger.

To ensure the card is used appropriately, parents and students should decide together what it will be used for and set the credit limit. This can be broken down into a weekly rather than monthly allowance. Statements can be sent to the parents' home, and they should have access to the card along with the student, to stop the use of the card if the debt is growing too high.

There are a number of student credit cards available, with many banks competing against each other for the best offer. This is a small sample of cards on the market, and they all offer different incentives from no annual fees to T-shirts:

  • Citi MtvU Platinum Select Visa Credit Card. This card has a six-month introductory period with 0% interest; 15.4% thereafter.
  • Citi Dividend Platinum Select Card for Students. This card has six months 0% Annual Percentage Rate (APR) increasing to 15.24%, with 5% cash-back on eligible purchases.
  • Citi Driver's Edge Card for College Students. This card has 0% APR for six months, increasing to 17.24% later. It also has a 3% rebate on purchases at certain outlets.

  • Bank of America Student Platinum Plus VISA. This card has no introductory rate, 19.24% APR, no co-signer required and cash advance checks are available.
  • Capital One Standard Platinum for Students. This card features customized card designs and 0% APR for six months; 17.24% thereafter.
  • Discover Student Card. This card features a six-month introductory period with 0% APR, later increasing to 16.99%.

Prepaid cards are also available:

  • Eufora Preferred Credit Builder Prepaid MasterCard. Features no credit check and a cash rewards program.
  • Eufora Elite Credit Builder Prepaid MasterCard. Features no credit check and a cash rewards program.
  • All-Access Visa Prepaid Card. This card has no credit check, a $10,000 load capacity and no upfront payment.
  • Wired Plastic Prepaid Card. This card has no bounced check or overdraft fees, plus a rewards program.

Similar to the credit cards, the providers offer incentives to hook the student in; the danger with many prepaid cards is the lack of credit history checks. A student with a bad credit rating is able to hold a prepaid card with the possibility of increasing their debt.

The best credit card depends on the student. A low APR is important, and the minimum balance still needs to be paid each month. For students with cars, a driver's card may benefit them, helping with fuel costs. If students do not feel comfortable with the credit card, the prepaid card is a safer option and easier to budget. If a card is taken out, it's important to be upfront about its usage. Debt does not have to become a consuming problem.

By Vicky Ann Smith