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Copyright © 2007-2009 Braxton Heitz
Credit is one of the most fundamental aspects of the financial structure we have built our society. In fact, a great credit score can be one of the most valuable assets an individual will ever have in his or her life.
A young person, just beginning to build a credit rating for his or herself will often discover that their lack of proven credit history will be disadvantageous to their goals. Having no established credit is generally viewed in the same light as having bad credit, because there is no way to foresee how well the individual will pay their bills.
Establishing Good Credit
Credit scores are determined by a number of factors. How much debt a person has, how regularly they pay their bills, and a history over a seven-year period, are typically the main factors used in determining a person's personal credit rating. For the college student, a student credit card can be a great financial product to help them begin the process of establishing their own good credit down the road.
College student credit cards provide a variety of options that can make them more suited for a beginner in the world of credit, than credit cards designed for more experienced cardholders.
Credit cards, in general, are a very easy concept to understand. They are like little loans that one will qualify for in advance and can use whenever they wish. The student can request a student credit card by filling out an online credit card application from any major bank, or they can fill out a credit card application at their local bank.
If a student ever needs to purchase something and they do not have the cash on hand, they can use a credit card to pay for it and then pay the credit card company the money back. Having a college student credit card is like having a kind and compassionate parent in their back pocket who will agree to any request the student has for cash.
Most student credit card providers prefer that a responsible cosigner be listed on the credit card application. In most cases, this would be a parent or guardian. Having someone with a great credit score, willing to vouch for the student's ability to repay any credit balances, is an encouraging sign for any lender.
The Dangers
A student credit card is obviously a good thing for many reasons. Many students use their cards for specific purposes only. This can be an essential item, or they could have it purely for emergencies.
One classic example is a gas credit card. It is common for students to use their credit card solely to purchase gas, so they always have a way of paying for gas when they need it. Other common choices include groceries and other basic necessities.
This is a very responsible way to handle a credit card. Problems begin when negative spending habits begin to develop. First, students begin spending more than they can immediately pay back. Student credit cards typically offer lower interest rates than traditional credit cards, but they still charge interest.
Most students are just starting out in life and they are not quite as responsible as they should be with their credit cards. They will get a student credit card for emergencies only, but fail to thoroughly define what they consider to be an emergency. As time goes by, they might become more inclined to consider a night on the town with their friends to be an emergency that will justify the use of a credit card.
Most credit cards have what they refer to as grace periods. This is a period of time that allows the cardholder a time period where interest charges do not apply. Grace periods are typically 30 days or until the end of the month of the original purchase. Different companies have different policies regarding their credit card grace periods.
Paying off the entire balance every month is the ideal situation, but there are always situations that will arise that make it difficult to do so. Paying off what you owe as quickly as possible is the only way to avoid accruing interest charges that can easily increase the consumers debt to double the amount of the original purchase.
Potential Perks
A wise spender can easily manage their finances, so that upon graduation, a college graduate could have established a solid enough credit rating to be able to buy a home straight out of college.
There are many aspects of student credit cards that are designed to help young cardholders wisely manage their debt. The amount of interest most people pay is considerable. College student credit cards are generally low APR credit cards, which means that the student will often pay a lower APR than someone ten years their senior.
In addition to low credit card APR rates, there are many Internet features available for someone with a student credit card. Online bill pay makes it possible for a student to easily pay all of his or her bills conveniently. Many companies also offer monthly reminders to help young people adjust to paying their bills regularly.
In Conclusion
A college student credit card can help prepare a young person for the immense financial world that awaits them at the end of their college careers. There are many potential pitfalls in the economic world that an untrained eye might miss, but the student credit card program will teach the attentive student how to spot and correct these potential pitfalls. Student credit cards can help prepare anyone for a life in the real world, and help a student enter adulthood with the good financial sense to make good financial decisions.
About the Author:
Braxton Heitz writes about family finances and the struggles of the job search. If you are looking for a job or looking to make a career move in the current troubled economy, then visit the Jobs And Paychecks website at: http://www.jobsandpaychecks.com/
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