Student Credit Cards: Avoid Them at All Costs!
If you are a freshman who has just arrived on campus expecting a fun-filled life packed with adventure, be prepared. I can guarantee you that within the next couple of days you will receive several student credit card offers in your mailbox.
Most people think it is great to get a student credit card. You’ll build your credit history and learn how to become financially responsible while giving you financial flexibility and more spending power. Most people think the best student credit cards offer low rates with a special lender's care attached.
But let me tell you why there is nothing further from the truth than this notion. Why would banks want to lend money to students? And why would they willingly promote this? Think about it.
Would I be willing to lend my money to someone with no job, who won’t be earning a salary for at least four years from now, who has no clue how to manage expenses and cash flow, or who has no idea how to budget money? If I would expect to receive that money back, I’d never do it. I am sure you would not lend your money to anyone like this either.
So, if you and I would never lend money to such a person, why are lenders doing it with great enthusiasm? Lenders see students as easy prey.
How Student Credit Cards Work and What a Student Credit Card Offers
You will see why in a second. Most students aren’t the smartest of spenders and they will build credit card balances fast. And they borrow heavily. According to a Nellie Mae survey, 95 percent of graduate students have credit cards with an average debt of $4,776 and six percent of those have debt greater than $15,000.
As you know, most students don’t have steady income. The result? Students will pay the minimum balance on their credit cards and have to spend years paying a huge amount of interest to the banks. Lenders actually hope for this! They don’t want their money back. They would rather have students get stuck paying interest for years to come because that is how they make big bucks.
Those with student credit cards will usually be late on payments. Although this is not good for the students, it serves the banks well. According to cardweb.com, credit card fees and penalties rack up 33 percent of total credit card industry revenue and reach about $11 billion a year. That is what the banks want because these penalties help them make money!
If you are a student, run from the credit cards! Don’t let the banks trap you! If you are a parent, teach your kids the value of money so that they don’t need credit cards.