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Student Credit Cards

In today's world, credit is everything. Without a solid credit history you can't qualify for a mortgage, a car loan, or a credit card. Or if you do manage to qualify you are not likely to get the best interest rates.

That's why it is so important to start building a credit history early. The sooner you start the better, and perhaps the best way for young people to start building credit is with a student credit card.

A student credit card is a special type of credit card designed specifically for young people who are in school and have little or no credit. They are fairly easy for young people to obtain, although some may require a cosigner. A cosigner is a person, usually a parent or guardian, who agrees to assume the debt in the event the cardholder is unable to pay. This can be a risky move and could ruin the credit of the cosigner if the cardholder runs up a large balance.

Fortunately, credit limits for student credit cards are usually set low. Most are set at around $500. This is because credit card companies view students as a higher risk since they usually have low salaries. For the same reason, interest rates are often a few points higher than standard credit cards.

Of course student credit cards offer more benefits than just establishing a credit history. They can help teach young people money-managing skills and financial responsibility. They will need to learn how to set a monthly budget so that they can pay their bills on time.

The temptation will always be there for them to use their student credit card for all sorts of things. But it will be a good lesson for them to learn that they can not just charge every new pair of shoes or concert tickets they want. They'll have to prioritize their spending or they'll quickly find themselves in over their heads.

And if they do miss a payment or go over their limit, they will learn their mistakes have consequences. But it is better for them to learn those lessons when they are young and with relatively small sums of money. And they will be thankful that they learned the financial skills that they will be using for the rest of their lives.
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