Most credit card issuers have special credit cards for Students.  Usually these credit cards carry a higher interest rate because of the higher risk represented by students with little or no credit history and little or no income. At the same time, if used properly, student credit cards provide the best chance for young Americans to start a credit history that will ultimately give them a good credit rating.

From a student’s perspective, building a good credit rating is essential upon graduation to secure a car loan to commute to work, and to obtain a mortgage to buy a condo or a house instead of wasting money in rent.  Moreover, more and more employers are using credit score in their hiring process, and a good credit score will add an advantage against other candidates for the most prestigious positions.  And last but not least, insurance companies are starting to use credit scores as a way to assess risk and therefore rate, meaning that all other things being equal, individuals with a better credit score will pay lower premiums than individuals with lower credit score.

Of course a student credit card doesn’t come with all the perks as a regular credit cards.  Usually there are restrictions on credit limit, no-fee student credit cards are hard to come by, and there are few rewards offered.  Think of this as the “starter credit card”, you can use it to build credit and to make life on campus easier.  Use it to charge necessities like your books and school supplies and then pay off the balance in full at the end of the month. Parents also can benefit from their students carrying a credit card, so that instead of sending money and not having a good account of where the money was spent, they can better monitor expenses by checking the credit card bill, and then pay it on a monthly basis.  And in case of emergencies, like an unforeseen trip back home, when time is of the essence, the student can easily manage without worrying too much about having the parents send money, check clearing, or wiring fees.

It’s a very good idea for parents and student to discuss and plan the use of a credit card as a way to ease college life, to better manage the money aspect of education, and to prepare and educate the student to life after college.

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Photo Credits: Patrick Haney (cc)