Credit card companies absolutely love students who are just entering college because older teenagers, as a rule, do not know how to manage credit. They charge whatever they want at the store, from fast food to the latest designer sneakers, without considering the consequences. This is why, especially over the last few years, credit card companies have pushed credit cards for students.
What are Credit Card Rewards?
One of the latest marketing ploys in this market is credit card rewards, which are bonuses for credit card holders who spend certain amounts of money. For example, the Citi mtvU Platinum Select Visa is geared toward college students and allows holders to earn five “thank-you” points for every dollar spent at certain establishments.
Are Rewards Good for Students?
Many wonder whether reward credit cards are the right choice for students who are just starting college. Student rewards credit cards might look like advantageous deals, but in reality they can land students in real hot water. Many students will see the benefits of the rewards-concert tickets, restaurant gift cards and airplane tickets and believe that they should rack up their entire credit limit just to get the most rewards. The real cost of credit cards isn’t apparent.
What Are the Pitfalls?
It is important for students to understand the negative effects of racking up too much credit, even when enrolled in the best credit card rewards program. For one thing, you’ll be paying interest on whatever balance you cannot pay back each month, which can amount to thousands of dollars more than what you actually purchased. For another, many student rewards credit cards charge annual fees on top of the interest rates. This depends on how much you intend to spend with your card. Many of these credit cards come with expiration dates on the points you earn, so if you don’t use your points within the time limit, you lose them. Again, this encourages students to spend as much as they can in the shortest amount of time possible.
Let’s look at the Citi Bronze AAdvantage MasterCard, with which you earn one AAdvantage mile for every $2 you spend with the card. However, they impose a cap of 25,000 miles in a year, and to get that many miles, you’d have to spend $50,000 over a 12-month period. Even if you manage to spend that $50,000, 25,000 miles isn’t as much as you might think. It will probably buy you a single round-trip ticket anywhere in the United States, but you had to spend $50,000 in order to get that single ticket.
How Do You Make the Final Decision?
When making your final decision, consider both the advantages and disadvantages of student credit cards with rewards: Earning those rewards points on student credit cards might seem like a lot of fun, but in the end you could do lasting damage to your credit. Even cards that offer cash back and other bonuses will make you spend a large sum of money before you benefit from your spending.
