4 Disadvantages of a Student Charge Card

A student charge card is often necessary to make ongoing purchases while you are in school and not earning an income. For example, many students must place expenses like books and meal plans on a charge card since these are not covered in student loan sums. Student charge cards can help build your credit while you are in school, but this plan works only if you are able to repay the cards on time. There are a number of challenges that can arise and eat away at the benefits of a student charge card. 

Lack of Collateral

When a student secures a charge card, that student rarely has a high degree of assets in his or her name. This means two things: first, the credit line on a student charge card is typically very low; second, a cosigner may be required. Both of these factors lessen the value of a credit card to improve a student's credit rating. Credit cards can build credit, but they do so only if the user maintains a low balance and repays the card by himself or herself. Both of these goals can be impossible with a student charge card.

High Interest Rates

Since students tend to have low credit to begin with, many student charge cards have very high interest rates. These rates would typically be nullified if a student could pay down the balance on the card monthly. However, since students often allow charges to revolve during the year and then pay off the balance when they work during breaks, the charges can compound to very high amounts. It is not unusual to see financing charges more than double the cost of a purchase on a student credit card. 

High Debt Loads

Today, student loans are as common as college diplomas. Most students graduating college will have some degree of student debt to repay. The rising cost of education has made it challenging to entirely cover the cost of a traditional four-year degree without financial assistance. In fact, the average student now graduates with several thousand dollars of debt. Adding to this debt with charge card debt will only hurt the student's credit in the short run. This debt load can present challenges if the student wishes to finance a car purchase, home purchase or other expense after graduation. Starting off adulthood with high amounts of credit card debt can truly impact credit in the long run as well.

Unforeseen Challenges

For decades, students have run up debt in college with the justification they would pay down the debt once they had secured an income. It was a foregone conclusion the student would start making money upon graduation to repay loans. However, this conclusion is not so certain in the current economy. More students are required to go onto graduate school, delaying earnings. Further, if the job market is weak, students can find it hard to locate employment even if they want to work. A college degree does not solidify a job opportunity the way it used to, and college debt can be an unnecessary and burdensome expense. 

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