A look at student credit cards
Connie Prater: Well this is the time of the year when millions of students are heading back to campuses and college and high school. Many of them are packing plastic. I’m Connie Prater, Senior Writer at CreditCards.com, with Dan Ray, Editor in Chief at CreditCards.com. Today, we’re talking about what parents and students should know about credit and managing credit cards. Dan, so what should parents know?
Daniel Ray: Well, it really important for parents and students to work out a budget plan, because, especially for college students, many of them are turning 18, that’s when you legally become adults, so that’s when you can sign contracts, including getting your own credit card, so students should, before they head out to campus, be armed with some basic financial knowledge.
CP: Now what about student credit cards? I understand they have high interest rates.
DR: Yes, here at CreditCards.com, we track nine different types of credit cards, and we you graph them out, here’s the low interest rate ones down here, and here’s the reward cards up here [gesturing]. Credit cards for students, the rates are the highest of any of the nine we track; they’re currently at about 14.7 percent, so they not only have high rates, but they come with low credit limits, typically 500, 1000, 2000 dollars.
CP: So now the types of credit cards that a student can get: there are debit cards, there’s secure credit cards. Let’s talk about that and what parents should know.
DR: That’s a really good point. Now, parents should match up the card with the student’s responsibility. You don’t want to bite off more plastic than you can chew, so you want to match up the type of card with the level of responsibility, because parents, you know who those types of kids that are responsible and those who aren’t. So, for those that can handle credit, great: student credit card: it helps them to establish credit, and we talked about that a little bit. For those that maybe need a little more monitoring, then how about a debit card? Parents can keep an eye on it, it’s the familiar ATM card that everybody knows about. Then there’s the prepaid cards, and those again, offer a good level of monitoring for parents, and finally, there’s the prepaid network card, now those are the types that carry the Visa and MasterCard logo, and again, they’re tied to a checking account, so they’re prepaid, but they’re accepted anywhere MasterCard or Visa is.
CP: So now we hear lots of stories on college campuses about students being offered free pizzas, free hats, free t-shirts, in order to get a credit card, and that can be a trap for students, can’t it?
DR: That’s a really good point; the students on campus for the first time, and it’s really dazzling and exciting and they’re all hyped up, ooh, and there’s a t-shirt or a hat with that Aggies logo or that Buckeyes logo on it, and they really want it. Try to resist that temptation, because the schools do not always have the student’s best interests in mind. There’s big money changing hands in between the big credit card issuers and the schools; they’re getting millions of dollars and they’re in essence pushing this credit card, particular credit card, on the students, and it may or may not be in the best interests of the students, it may not be the best deal, so it’s really important to shop around.
CR: So, to recap then, it’s very important for students to know about credit while they’re on campus. Find a student credit card with the best interest rate for you. Parents, help your student to live on a budget. Teach them fiscal and financial responsibility early on. I’m Connie Prater.
DR: And I’m Dan Ray. And for more on this and other credit information, go to CreditCards.com.
CreditCards.com editors Dan Ray and Connie Prater talk about student credit cards.