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| Differentiating Between Credit Cards for College Students |
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Whether you are a college student or the parent of a college student, you may
have started looking at various types of credit cards for college students.
Having a credit card while in college is almost a necessity. Generally, college
students do not have much money to spare since they are attending school.
Therefore, they need to rely on their parent's financial support or they have to
borrow money from a credit card while in school and then pay the borrowed money
back later. To choose the right student credit card, however, it is important to
understand the differences between different credit cards and the benefits and
drawbacks to both.
Unsecured Student Credit Cards
Unsecured
student credit cards are those that extend a line of credit to the cardholder.
Therefore, you can spend money with the card as a loan and pay the money back
later. Since college students tend to have very little credit history, it can be
difficult to get a credit card. Obviously, most credit card companies prefer to
extend a line of credit to someone with a proven history of paying back loans.
Fortunately, there are a number of credit cards that cater specifically
to college students. These companies understand that a person attending college
will not have a great deal of established credit history, yet need the help of a
credit card to get through college. In addition, the fact that you are attending
college gives the companies a reason to believe that you will be responsible
about paying back your debt.
The greatest benefit to an unsecured
student credit card is that you don't have to have money to use it. Therefore,
college students that don't have the cash up front can take advantage of the
borrowed money to by books, school supplies, and to help pay for living
expenses. This can be a lifesaver to someone who is scraping by while in
college. In addition, there are a number of unsecured student credit cards
available that do not have annual fees or any other types of fees.
The
biggest drawback to an unsecured student credit card is that it is possible to
spend beyond your means and acquire a debt that you are unable to overcome. If
this happens, or if you are unable to keep up with your payments, your credit
can be destroyed. For someone who is working on just getting started in life as
an adult, it is not good to get started with a major debt or a big black mark on
your credit record. In addition, student credit cards tend to have a higher
interest rate than traditional credit cards. Therefore, you may pay a great deal
of money in finance charges when borrowing money in this way.
Secured
Student Credit Cards
Secured student credit cards are cards that money
is deposited onto ahead of time. In other words, if you don't put your own money
on the card before spending the money, you can't use the card. Therefore,
secured student credit cards are like a debit card. Secured student credit cards
do not look any different from unsecured student credit cards.
The
benefits of secured student credit cards are that you can still have the
flexibility offered by carrying a credit card, but you don't have to worry about
burying yourself in debt. For parents that are helping their college-age child
through college, secured student credit cards are a great way to provide the
student with an allowance to help pay for college expenses.
The major
drawback to secured student credit cards is that these cards usually have a
large number of fees. Often, there is a fee to set up the account in the first
place. Then, there are usually annual fees and maybe even monthly fees. There
are also fees associated with depositing, or "loading," money to the card. These
fees can be quite expensive.
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