Student Credit Cards – Benefits and Pitfalls
One of the many advantages (or temptations, depending on how you look at it) of being a college student is that you will be offered various special credit cards during the course of your studies. Student credit cards can be a huge benefit to you as a student, but there are also known pitfalls that are associated with incurring debt while you are still in school. Let’s look at what you need to consider before you say “charge it”.
Credit Cards Just For Students
A student card works just like a regular card and is usually branded either Visa or MasterCard, although there are some department stores that offer cards specifically for students as well. A credit card is different than a debit card. While the debit card can be used in lieu of cash and is backed up by funds that you have in a bank account, when you use a credit card, you are borrowing the money for your purchases from the bank or credit card company that issues your card. You “charge” purchases during a specific period and receive a bill at the end of the billing cycle. You can elect to pay the balance in full when you receive your monthly statement, or you can make the minimum monthly payment. Balances for purchases that you have made will accrue interest at whatever APR (annual percentage rate) that you agreed to when you accepted the terms of your account.
Benefits of Student Credit Cards
The biggest benefit of having your own student credit card is that you don’t have to carry cash with you. Carrying cash on your person poses security risks that can be avoided totally when you have plastic. If your student card is lost or stolen, any charges made to it (if properly and timely reported) will not be your responsibility. Another obvious benefit of student cards is that you will have instant access to money for purchases that you must make. As any student can attest, it is often hard to make financial ends meet when you are attending class full time. Having a “backup” funding method is perfect for emergency purchases that you can’t make with your regular funds (and without asking Mom and Dad).
If you decide to take advantage of a student credit card, be sure to know the responsibilities that are tacked on to it. If you run up a big balance it can take a long time to repay because much of a minimum monthly payment is just the interest on your balance. You must make your minimum monthly payment each month on time. If you fail to do so, your credit score can be negatively affected. A bad credit report can haunt you for as long as seven years, longer in some states. Be sure that you are responsible enough when handling your finances to actually manage a credit card. And beware of taking out too many cards at once; little amounts charged “here and there” can add up over time, leaving you swimming in debt before your career even gets started!
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