College Credit Cards: Apply before Rules Change!
Student Credit Card Advantages
Having a student credit card has become the American way of life. It has been estimated that nearly 85% of American households have credit cards of some sort. Here are just a few of the major advantages having a credit card offers.
Convenience – Obviously this is arguably the biggest advantage to owning any type of student credit card. There is no having to dig around for cash, or trying to find your checkbook. It is quick and easy to hand the clerk your credit card. Most every merchant accepts them around the world.
Credit Score – Using a student credit card wisely, and correctly, will build your credit score and improve your future credit purchases, such as a home. Every month your credit report is updated with payments that are made. Lenders look at your credit history to see if you pay your bills; pay them on time, and how much you charge up.
Monthly Budget – Having a student credit card can help you budget your monthly bills. Keep in mind though; this will only work if you pay off the entire balance every month. You will have your monthly credit card statement that itemizes your transactions each month and you will know exactly what you have spent.
Credit Card Float – A float is the time from which you charged an item, and the date in which full payment is due in order to avoid interest charges. You can really use this to your advantage if you are smart. Many times you will get an extra 30 days to pay off the balance before interest kicks in.
Student Credit Card Rewards – Many credit card companies offer rewards that you can never get by using cash, checks, or a debit card. Student credit card reward programs include cash back, airline rewards, and other merchandise programs. These rewards can be a nice addition that comes in handy at times.
Protection – This is another big advantage to having a student credit card. If your credit card is stolen, you will generally only be responsible for the first $50 at most. Many times, if you report the theft in the first 24-48 hours you will have the $50 waived.
Other ways student credit cards can offer protection is with merchants who will not honor a refund request. It is so easy to dispute the credit card charge instead of trying to get cash refund if you paid by cash or check. You have the leverage of your credit card company helping you.
How Much Credit you can Get?
The purpose of a credit card is to allow a company to “credit” you a loan for a certain period of time. The first thing that you usually need to do is find the credit card that you want to apply for. From here, you’re going to have to be accepted from the credit company itself. This is probably the toughest part out of all the steps. Previous credit, debt to income ratio, and other factors determine if you will be accepted or not.
Once you’re accepted to the credit card program, the company then has to determine how much money they are going to let you carry. This is called the credit limit. This number can raise or lower over time depending on how you use your card. If you tend to pay your bill off on time EVERY time, most likely you will receive a nice increase. If you fail to do this, your credit limit may drop and your APR may even increase.
Let’s look at what credit card companies look at when determining your credit limit.
Your monthly income - This is probably the biggest one. They want to see exactly how much you make to see what limit is right for you. They don’t want to give you a $3,000 limit if you only make $300/month.
Your current debt – These debts usually include car loans, student loans, mortgages, and other credit card bills. The more debt you have, the more hesitant the companies will be in giving you more of a limit. The less debt you have, the higher your credit limit will be.
Length of your residency – This may not seem like a big one but companies want to make sure you’re not jumping from one place to another every other month. This may raise red flags because most likely you’re either being evicted or you can’t afford to pay your rent payment. Now of course, you may move because of job purposes, etc but companies tend to like you to stay at your residence for more than a year.
Other credit cards you own – The more credit cards you own, the less likely you’re going to be approved for a high limit. This is because you have access to all of this credit and nothing can stop you from building it up and declaring bankruptcy. Banks are very careful when it comes to how many credit cards you own.
These four points are probably the most important factors when coming down to determining your credit limit. The more money you make, the higher your credit limit is, and it’s that simple. To ensure you receive the highest limit possible, you will want a nice income, NO debt, and a decent length at your current residence, and a very limited amount of credit cards.
Using Credit Card for College Expenses
In this day and age, a growing number of college students are relying upon student credit cards for a wide variety of purposes. Indeed, there are noticeable amounts of college students that are using their credit cards to pay for some of their university related expenses. If you are considering doing the same, you do need to understand the pros and cons that are associated with using a student credit card to pay some education related expenses.
Obviously, you do not want to fund your college education using a student credit card. Indeed, odds are that you will have nothing near the credit limit available to undertake such an endeavor. However, there are people who stretch their credit cards to deal with college expenses. You do not want to misuse your student credit card in this manner.
There are some appropriate college expenses that you can take care of utilizing your student credit cards. For example, you might want to purchase your books and classroom supplies using a credit card. This particularly can be an appropriate course to take if you are awaiting a student loan payment. However, you must keep in mind that when your student loans repayment times arrive, you need to pay off the balance on your student credit. The interest rate on the student loan should be lower than what you are paying on your student credit card.
Along the same lines, you may also want to consider paying certain student fees with your student credit card. But, as has been mentioned, you are going to want to make sure that you deal with paying down the balance when you do have funds available, perhaps from a student loans payment. The key is to not let the balance carry forward at a high level into the future because you will end up forking over a great deal of money on interest – which will make the use of the student credit card in the first instance a less than financially favorable event.
From time to time throughout your college or university career you may end up facing some sort of unseen expenses associated with your learning experience. A credit card ideally is suited to dealing with such emergency or unexpected situations. Therefore, it is always wise to make sure that you do not overuse your credit card to the point that there is no “room” available in the balance to deal with some sort of unexpected expenses.
Get your Credit Card NOW!
Note that starting from February 22, 2010 credit card companies will be restricted from direct mailing of credit card applications to a student. There will be more oversight and transparency for universities which do legally work with and receive large bounties from the top credit card companies. Furthermore, from February 22, 2010 all students under the age of 21 will have to have a credit worthy co-signer OR the student must provide proof of income from their employer of from independent sources.
The Credit CARD Act will prohibit issuers from lending to anyone under the age of 21 unless he or she has a co-signer or has proof of the ability to make payments. Unsolicited card offers will be prohibited to everyone under 21. Credit card companies cannot try to lure students into signing up for a credit card with any tangible item anywhere on or near a college campus or a college-sponsored event.
Do you want to know, why the college students are punished by tough limitations? Based on a recent Sallie Mae study, it is easy to see why lawmakers put these restrictions in place. 84% of college students have at least one credit card, up from 76% in 2004. The average amount of debt carried by college cardholders is $3,173, which represents a 46% increase over the 2004 figure of $2,169. The average number of cards per student is 4.6. Only 17% pay off their entire balance each month and 22% make just the minimum payment.
Issuers have aggressively marketed cards to college students because they know that many parents will pay off the bill if the student runs up debt. In addition, brand loyalty is determined early in life, so many young cardholders keep their first card for many years.
So, act now and apply for your credit card before the new acts are enforced. But… use responsively!
Sources and Additional Information:
Posts
