The Federal Government has focused attention on credit card companies and their impact on consumer finance. While many of the credit card rules enacted have eliminated unfair practices, when consumer statistics are examined, the laws have proven less than effective. Americans continue to borrow to for the extras or to maintain their current lifestyle.
One group that was considered vulnerable to credit card abuse and in need of legislative protection was young adults and students. Credit card companies that were soliciting on campuses and places where young adults gathered were deemed overly aggressive and a potential threat to their financial future.
But in defending the need for federal intervention, credit cards were portrayed as a bad thing for young people. But far from being a thing to avoid, learning early how to manage a credit card account is necessary in establishing a healthy credit history that will open up possibilities for their future hopes and dreams.
Things to Look for in a Student Card
Credit is a tool that requires proficiency and time to reap the benefits. Children who learn to save for the things they want and for the simple joy of watching their savings account grow have an advantage when they graduate to managing a credit card.
The most important factor for anyone just beginning to use credit is that the spending limit is low enough that it can easily be repaid. Handing a credit card with a high credit limit to a new user is just asking for trouble. This is especially true for the co-signer on account. Federal law requires one for anyone under the age of 21 applying for a credit card, unless they can prove adequate income in their own name to cover the debt themselves. Many people are under the impression that co-signing is no big deal, but it is risky and serious business. Not only could you be held responsible for the debt, but be harassed by collection agencies and ultimately see a drop in your credit score.
Visit Capital One’s Journey webpage built for student education before choosing to apply for the Journey(SM) Student Rewards from Capital One®. Learn how to use credit responsibly and have all your questions answered.
Use Credit Wisely is the Citi website designed for consumers to size of their credit smarts. Check out how good you are at credit management, budgeting and more. CitiCards offer several cards targeted to new credit users, including the Citi Forward(SM) Card for College Students and the Citi® Dividend Platinum Select® Card for College Students.
If you decide that the economic level or maturity of the young person is such that it wouldn’t be a responsible move to agree to cosign on a credit card account, there are several other options to consider.
Secured credit cards are available to just about anyone, regardless of credit history. That’s because a security deposit is required – normally between $100 and $500 – before you can make any purchases. Since the security deposit determines your credit limit, if you run into a problem paying your bill at any time, the deposit will be used to cover your obligation – securing your debt.
Prepaid Debit Cards function just like standard credit cards, except on a ‘pay-as-you-go’ basis. Instead of receiving a line of credit, you must prepay or ‘load’ the card to make purchases. When you use a prepaid debit card, the money you spend is deducted from your account. When it’s depleted, you can’t use the card again until you make another deposit or ‘reload’ the card.