Students headed for college are often leaving home for the first time. One of the first challenges they face deciding how to pay for purchases, take care of bills and manage their money when Dad isn’t around with his wallet.
In the past, student credit cards were obtained by anyone willing to sign a credit agreement.
The easy credit was deceptive as interest rates were often high and students who didn’t understand the risks of overusing credit often faced financial problems quickly.
Unlike credit cards issued to most consumers, college students did not have to have an income to qualify for credit. The issuing banks understand students had little income of their own.
The credit companies counted on parents to pay bills or on the earning potential of the young person when his education was complete.
A college education is assumed to lead to a professional job with a decent salary. This is the type of consumer credit lenders want to attract.
If they could lure this new consumer who had just reached the age of majority and gain his loyalty (and his debt) they reasoned they would have a good, paying customer for many years.
New consumer credit laws have made it somewhat more difficult for credit issuing banks to prey on young adults. A parent’s co-signature may be required to get that first credit card. Most parents are willing to co-sign.
The parents reasoning may be that carrying a credit card is safer for their student than carrying cash. That may be true in the short run but could lead to future financial distress unless the student understand the 5 things a credit card should be used for.
University Tuition and Fees
Students with grants, scholarships and students loans may still have fees over and above the money they have allocated to pay for their educational courses.
Tuition is often paid at the time of registration which may be weeks before classes begin. Many young adults in school work a temporary job during summer vacation months. Charging the tuition not covered by student financial aid will allow monthly payments that may be easily covered by a part-time or summer job.
Textbooks and Supplies
Textbook costs are so high today that they must be included in the budget plan of any college student. The necessity of buying all course textbooks at the beginning of each quarter or semester can place a dent in any budget. The ability to spread those payments out over the months they will be used makes the prices easier to bear.
Some specialized courses may have requirements for supplies and equipment that are not included in the school’s tuition. Designated reading materials or art supplies can be costly but purchasing them with the student’s credit card allows the cost to be spread over time.
Textbooks are costly and must be purchased at the beginning of each quarter or semester. If you resell your textbooks after completing that class, that could provide the money to finish paying for those books and leave room on your credit card to pay for textbooks for the next semester.
If you take your own car to school there are daily and monthly expenses associated with it. There are the standard insurance costs, license or registration annual fees, oil changes and fuel costs.
You may want to use your credit card for all of the cost of using your personal vehicle or only to keep track of the costs of your gas and maintenance. In an emergency, your credit card can help pay for repairs.
If you use public transportation, you may be able to buy discount tickets that are good for a certain number of uses or for a time period of one month. A credit card can enable you to take advantage of public transportation discounts that might be available.
Personal Living Expenses and Emergencies
A personal credit card is useful in paying for those living expenses such as clothing, personal care items and toiletries.
This can be useful for both the student as well as parents who might be paying those credit card bills. Charging daily purchases that are normal living expenses is useful in tracking your spending.
If you are hurt or become ill, you may need to pay for medical services or buy prescriptions not covered by health insurance. Over the counter medicines to treat a sports injury or infectious disease can drain your cash. If your health insurance pays after the fact, a student credit card can fill the gap.
Food and Entertainment
Charging food and entertainment to a credit card can be risky for a college student. If you eat in the school’s dining facility it makes sense to charge a monthly or quarterly meal ticket. If you infrequently need to buy a special concert ticket, by all means use you student credit card.
However, it is wise to avoid pulling out your plastic card to pay for a hamburger, pizza or party supplies. It is too easy to get into financial difficulty and find yourself paying for months for a spur of the moment meal or movie.
When you understand the what your credit card should be used for, you are on your way to controlling and tracking your spending during your years of higher education.