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Student Credit Cards - An Introduction



The market for student credit cards has grown over the last two decades in a number of ways which although necessitating a degree of concern, has been healthy enough to reward prudent consumers of college age with convenient access to credit which serves a number of purposes which are useful once they graduate and enter the professional world.

The main impediment to granting students the unsecured credit that these cards provide has always been that most students do not have the financial stability which obviates the risks involved in the offering of large sums of credit. Many are actually in unenviable financial situations as they may carry large amounts of debt in the form of student loans or may be enrolled in educational fields with limited financial prospects for the future.

The credit card companies, understanding these risks, however decided that embedding their brands in the minds of students and offering cards with tailored rewards benefits geared towards the lifestyles of students made good business and marketing sense. Credit cards offer conveniences beyond the unsecured lending they make available. There are any number of everyday conveniences that are difficult to obtain without a credit or debit card. Car rentals, online shopping, hotel stays and accounts for domestic utilities are examples of general necessities which are awkward to negotiate without the convenience of plastic.

Additionally, the college years are a perfect time to build and establish ones credit history in preparation for the major financial obligations that come after graduation where one needs a solid credit history. Although it is of course possible to obtain student credit cards with the help of a cosigner such as ones parent, this is often not necessary these days. This does mean however that the amount of credit available for many college card accounts is quite limited. If one considers the student card as primarily a means of building credit, then this limitation is not a major drawback. The idea here is to learn to work with the limits offered by the issuers and to show -over time- a record of being able to responsibly handle lines of credit (which credit cards effectively are). These traits help to maintain a high credit score and these scores are now a standardized way in which potential creditors evaluate one as a potential borrower.

The rewards offered by card issuers for the "Student" niche include points and rewards for books, entertainment, travel and other purchases which are central to college life. Some issuers have developed imaginative programs which do more. CitiBank, for example, issues its mtvUTM in an arrangement with the popular MTV Newtworks and its mtvU program for college students. The card is a model for doing things the right way. The card offers points (ThankYou Points which are also a Cite program) for students for maintaining a high grade point average and also for practicing good credit habits such as paying their bills on time and not going over their credit limits. The mtvU program also makes available resources for learning general healthy personal finance habits.

When choosing a card, students now have a range of choices and therefore can be selective and opt only for cards with the most favorable terms. There are several offers that come both with no annual fee and a 0% introductory rate. There is no reason to choose any other type of card. The introductory fee offer however requires some care. It's always a good idea to research the regular rates which kick in after the introductory term is over. These can be a jolt of reality for students unprepared for the difficulties that can come as high interest rates are compounded for debts they owe. There are now moves in the US Congress to enact legislation to protect students from predatory credit card lending practices. The Senate Bill S. 1925: the Student Credit Card Protection Act of 2007 is the furthest along to being shaped into law.

Citibank has an interesting program offering credit cards for parents which allow them to earn money for a child's college education. It is part of Citi's Upromise Program. A number of Upromise Credit Cards offer a percentage (at present it is 10%) of card charges made at participating marchants to go into a non interest bearing account which is structured to pay for future college fees. The account allows other friends and associates of the relevant family to obtain for their own Upromise cards and to apply their earned savings amounts to the account the family has set up for the future student. This is an example of an imaginative way in which an issuer has tailored an offer to fill a needed niche.

In sum: with prudent planning; the setting of a sensible and practical budget and proper selection of a favorable offer, student credit cards offer convenience and an indispensable tool for starting down the road to financial responsibility.



 




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