The Student Credit Card

A student credit card works the same way as any other card, but it's specifically geared toward high school and college students and often comes with some restrictions.

Some companies require a parent or guardian to act as a back up source of payment. As co-signers, they are obligated to cover any debt their children can't pay themselves.

Interest rates are typically higher for this type of card in order to alleviate the added risk perceived by the credit card issuing company.

Since few students have established credit ratings, the spending limit can be significantly lower for a student credit card. It is usually between $500 and $1000.

When managed prudently, a student credit card can be a huge first step toward financial independence.  A solid credit rating will enhance the student's future chances of being approved for larger loan requests.

A student credit card teaches financial responsibility within reasonable limits. Because it works like its adult counterpart, mastering its use will improve a student's money management skills.

These skills include identifying those situations which would benefit by transferring the balance from one card over to a different card.

The balance transfer process requires an astute understanding of how card companies operate.  If the student has learned well from their initial experience, they should be better able to implement the transfer.

To avoid overspending, creating a budget is probably the best protection a student can have. A realistic view of the money coming in and going out is essential.

The student must quickly learn that their little plastic card is not free money.  The temptation to buy those concert tickets... or that new pair of jeans... or that fancy dinner for someone special can be all too powerful and quite unforgiving.

Someone who is new to using credit cards may inappropriately think they don't need to worry about meeting minimum payment deadlines.  This attitude is an indication of impending credit problems.

Never... never miss making your payments on time.  At a minimum, call the credit card company and tell them you are having difficulty making your payment.  Let them advise you of your options, but don't simply avoid the issue.

If used responsibly, the student credit card can be a huge step toward financial independence. If it is treated with respect, it will be your servant instead of your master.