Credit cards when starting college full time
When starting university full time, the student’s need for a credit card becomes greater. After all, in many cases this is the first time a student has left home and many items once purchased through a parent’s payment facilities are now to be purchased by the student themselves.
Of course, there are some accompanying dangers when students begin applying for their own credit cards. This is also the first occasion for many students to assume full control of their own financial affairs and to be expected to pay all their own bills. In short, they now have the ability to make a mess of their finances. No matter how well parents have prepared their children, some mistakes are bound to happen. However, some of these can be avoided.
Although credit cards can be a genuinely useful financial tool, new credit card users should exercise caution as well as a healthy dose of scepticism when entering this market.
The two areas where scepticism is most needed are applying for offers and examining introductory interest rates. Many credit cards, particularly those aimed at students and young adults, carry tempting introductory offers, such as shop vouchers, gift cards for clothes, concert tickets, or even free pizza. It is not always the case, but it is very frequent, that these credit card offers include some of the highest interest rates and worst terms and conditions on the market.
Introductory interest rates are somewhat more attractive, sometimes falling as low as 0% on purchases made with the card. This can appear very competitive. However after a few months the introductory rate will expire and the student will be stuck with the standard interest rate that the credit card charges.
One issue that can affect students when applying for credit is that they either have no credit record, or that their credit record is very sparse. The solution for this problem may be a co-signatory credit card for the first year or so.
A co-signatory card requires two people to apply for the credit card, the main user and a secondary user, who is often a parent. In effect the main user borrows the secondary user’s credit record, as the secondary user agrees to repay the credit card balance should the main user default. This allows the credit card to carry a lower interest rate and a higher credit limit than otherwise would be possible. A co-signatory credit card helps the student build their credit rating and allows them to acquire their own credit card after a year or two of demonstrated responsible financial management.