Many college student credit cards come with very high interest rates. Interest refers to the money you have to pay if you buy something and pay it off in installments instead of all at once. When you pay something off in installments, you pay an extra fee every month, based on how much you owe and the interest rate.
Almost all loans are paid back with interest payments, including mortgages, car purchases, and student loans.) If you have a low interest rate, the extra money you pay every month won't be too bad. If you have a high interest rate, you'll be paying lots of extra money every month, and it may become very difficult to pay off your credit card debt!
Credit card companies are counting on college students to spend beyond their means with their credit card. They make a fortune on interest payments from college students. So, does that mean you shouldn't get a credit card? No. Actually, most college students would benefit from having a college student credit card, as long as they use it wisely.
If you pay your credit card bills on time every month, you will build a good credit score, which you will need later to make major purchases like houses and cars. In addition, having a credit card for financial emergencies is important. And without a credit card, it becomes difficult to purchase things online.
College students don't realize that having multiple credit cards, even if payments are made on time, can make it difficult for them to get other types of credit after graduating, especially if their income is low. Lenders look at the debt to income ratio, as well as credit history, when decided whether to give out loans.
Plus, bad credit reports can hurt students' chances of obtaining some types of employment. For example, banks rarely hire people who have bad credit histories or who have filed bankruptcies.
Debit Cards
Alternatively, debit cards may help control a student's spending. A student opens a debit card account by depositing money with a bank or credit union, and funds are deducted whenever a purchase is made with the card. If the available balance in the account is not enough to cover the purchase, the transaction can't be completed. In addition, there are no interest or late-payment charges with a debit card, though other fees may apply.
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