Credit card designers have designed various types of cards which meets the requirements of different people. Along with normal credit cards, there are student credit cards which have been especially designed for college going students to meet their study requirements. Although, all credit cards operate in the similar fashion however, the two main points of difference between a normal card and a student card is the APR and the credit limit.
Student credit cards
The annual percentage rate is usually higher on student credit cards as compared to normal credit cards. The reason behind this is the lower credit limit. Credit limit on such cards are generally very low. This can range from $500 to $1,000. The purpose of low credit limit is that most of the students have never used a credit before and this is why they do not have any knowledge about using credit cards along with the absence of credit history and records. Since a solid credit history is what a card issuer looks for and the credit record is what the applicant is in search of, both the aspects can be met by keeping the credit limit low. By issuing student credit cards with lower credit limits, the issuer reduces the risk of issuing a card to one who does not have any credit record. On the other side, this is also good for the student as it will reduce the risk of damages which is empirical with little or no knowledge about credit cards or by having bad spending habits. Furthermore, the offered credit limit is considered to be sufficient for the needs of a college going student.
In addition to this, the terms and conditions on student credit cards are stricter as compared to other cards. They may generally require the applicant to make parents or guardian as the guarantor of the student.
There are many merits as well as demerits of student credit cards which are mentioned as follows:
When you get under hot water, these cards can be the best option to recover from. In an emergency situation, these cards will help greatly. You will become self dependent.
There are many incentives associated with student cards. These incentives include cash back, rebates, etc which can be helpful in buying books, clothes and other related things. Also the fees and APR’s on these cards are very low.
Since the ownership form of the card will be co-signed by a parent or guardian, the bill will be delivered to both the student and their parents. In this way, they are able to know much their children are spending.
Student credit cards are also an excellent way of creating your credit record. If the card is used wisely, it will help in mortgages and secured loans in future.
Credit cards can get you trapped within debts. If the bill is not paid regularly and on time, the interest will start accumulating thereby, creating a huge amount of debt. Since these rates are higher on these cards, it will soon outweigh the benefits and discounts allowed.
The danger of overspending is always present in student credit cards. If you overspend, you will have to pay more money and if it is not paid, you will be charged with additional fees which can also put a harmful impact on your studies.