Student Credit Cards

Student credit cards are available in almost as many packages as adult credit cards. Bonuses and reward incentives are attached to the cards in an attempt to solicit students to sign up for the credit card. Whether they are called bonus, reward, or thank you points or dollars, most cards offer them in return for using the card. Specifically, the student will earn between one and five percent on their purchases. This can be in the form of a cash back check or points that are collected and redeemed for certificates toward other purchases.

Another incentive attached to these cards is a 0 % introductory APR for the first 6 to 12 months, depending on the credit card company. After the initial period, a fee might be assessed on the account. Additionally, most credit card companies that solicit teen users will initially wave the annual fee in an effort to make the credit card that much more attractive. Students generally have little ready cash, so fewer initial fees are appealing and enticing.

Furthermore, student credit cards normally have a number of restrictions placed upon them that regular credit cards do not. Most credit card companies that solicit students require the signature of an adult, the parent. Lower spending limits and higher interest rates are the next two most common restrictions.



While no federal restrictions on age exist, most states have their own guidelines on legal age requirements. These guidelines may vary somewhat, but technically, individuals who are under the age of eighteen cannot enter a legally binding contract. Signing up for a credit card and all of the rules associated with it is a legally binding contract. What this means is that the individual cannot be held responsible for the debt unless they are a legally responsible adult, defined as an individual who has reached maturity or the age of eighteen. Therefore, individuals under the age of eighteen cannot be held legally responsible for any debt incurred while using the card. Nor can the parents or legal guardians of the individual be held legally responsible.

Therefore, if the individual amasses a great deal of debt and fails to make good on the payments, the company will have to close the account without being able to collect. This is one of the reasons why the interest rates on student credit cards are so high. The profit made from charging high interest on debt that is collected is spread out, so to speak, to cover the debt created by individuals under the age of eighteen who fail to pay their accounts. Some companies may attempt to collect the debt from the parents of the student, but this is not a legal maneuver.

Limits on the student credit card are low for several reasons. The student has not had a chance to develop any credit history as of yet, and therefore the allowable spending limit will be a minimal amount. Additionally, lower limits prove less risky to the company issuing the card. Lower credit limits are beneficial for the student, however, since they reduce the risk of falling into extremely high debt. At the same time, the student is able to slowly build up their credit history, in a positive manner with small expenditures and payments.

Since lower interest rates are generally reserved for individuals with excellent credit, or proven track records, a student credit card generally comes with a higher interest rate attached to it. Additionally, the higher risk of loss to the company due to unpaid bills is another factor fueling higher interest rates on student credit cards.

Students generally have had little or no experience handling their own money and expenses. Owning and using a credit card can be a learning experience with positive or negative consequences. Credit card usage is an excellent way for students to begin to build a credit history. If they fall into debt, it will make it that much more difficult to acquire another card. However, with the proper use, a credit card can create a positive credit score for the student.