Student Credit Card Offers
Rising costs of tuition and living expenses are the main contributors to why college students need student credit cards. Many products geared towrd these individuals come with slightly higher interest rates than those offered to general consumers, yet the rewards programs associated with them make them appealing. Responsible spending with student credit cards help pave the way to creating a healthy longterm credit history. In addition to the rewards programs, some student credit card offers come with 0% introductory terms. This allows savvy individuals to use their cards during the school year without interest accrual and then pay-off balances in the Summer when classes break and they have more income from Summer jobs or paid internships.
Cosigners & Proof of Income Requirements
The government tried to limit the accessibility of student credit cards by adding certain requirements outlined in the CARD Act. The most useful in our opinion was the elimination of tabling events where issuers were able to set up shop and entice students with attractive things including pizza, frisbees, etc. in order to get them to apply for one of their products. This has been eliminated and with good reason as it prevents the way credit cards should move, not just with students. Consumers and students alike should comparatively shop. The part of the Card Act that was written a bit too loosely from a government perspective was the cosigner and proof of income requirements section. It's probably a good thing as though the government should protect us to some degree, it should be limited to unfair and agregious practices only. This should not include the paternal and anti-capitalistic approach in which this legislation was written.
Proof of Income Requirements
These vary from issuer to issuer but the base criteria is that the underwriters from the banks need to assess whether or not they think that a student can pay back a certain loan on a student credit card based on their income. In the past, this was a little bit more lax and cards were issued with the projected understanding that the student would eventually be able to pay back the loan. It basically developed scenarios where while in school, the person would be able to float by making minimum payments and then finish college with multiple credit cards and massive debt. Now, if you want a student credit card you have to proof that you are good for the money lent on an annual basis. It's a pretty straight forward concept and the result will most likely result in lower initial credit limits although this is just speculation as the legislation is so young that not enough data has been gathered. An example of this is that Discover Card requires an annual income of $2000 for a student be eligible to apply for a card without a cosigner.
Some banks, though very few, are requiring cosigners for student credit cards. You don't see this as often as it requires way to much investigation and paperwork. Plus, parents aren't completely willing to cosign a credit card for their child unless they are completely convinced that their child will use it for educational expenses, not for things like pizza, alcohol, video games and Spring Break trips. Many parents have also taken a hit financially, especially relating to their retirement plans, and are not thrilled about being on the hook for potentially more debt. As a student, it's probably a better idea to apply for a card without a cosigner anyway unless you don't meet the minimum income requirements. Part of the transition from adolescence to adulthood that is facilitated by the whole college experience focuses on becoming responsible, especially with money. Student credit cards are the first step in the longterm exposure to loans so having a cosigner may be detrimental to the impact of spending carelessly. If you opt to go with an offer that does not require a cosigner, make sure that you take the time to compare student credit cards to make sure that you get the best interest rates available.