Low Interest Student Credit Cards

by Mack Bartlett

What are the two fundmental principles of Investing 101? Risk and reward. If you’re going to put money into an investment, you have to take the potential risk and the potential reward of the investment. The riskier the investment, the higher the potential reward has to be.

Does this have anything to do with credit cards and interest rates? Of course it does. I want you to find low interest student credit cards, but I want you to understand why it’s not that simple.

Every time a credit card company extends a person a line of credit they’re factoring in the potential risk and the potential reward. You might think credit cards charge high interest rates on most student credit cards because they just want to soak the students for all their worth, but it has more to do with how likely students are to pay their credit card balances.

Interest rates are high on certain types of credit cards for one reason: the people that have been issued that type of card are more likely to flake on their payments, whether that means they pay late or they don’t pay at all. Students are a high risk demographic for credit card companies. According to the standard measurment tools (the credit bureaus), a college student is someone doesn’t have a proven track record of using their credit cards and then paying their balances. They just haven’t had access to credit cards for long enough to prove they’re a safe investment.

The reality is there are a lot of people who just can’t handle credit. They treat it like free money that won’t have to be repaid. They pay late or they don’t pay at all and the credit card company gets stuck with the bill. Most college students represent an ‘unknown quantity’ to the credit providers. Maybe they’ll behave themselves with a credit card, and maybe they won’t. Only a credit history can prove it, and college students haven’t had time to build one.

College students can get higher rate cards and use them consistently as a way of proving their credit worthiness. It may even be in their best interest to carry a small balance on the card and pay it down over time. Yeah, you pay some interest, but just look at it as the cost of doing business. If you can show the credit bureaus you’re trustworthy you’ll be able to get high limit, low interest credit cards down the road that you can use for good purposes like running a business or buying advertising.

All that being said, you may be able to find a student credit card with an interest rate between 8% and 12%. Not bad for a first timer.

Either way, if you pay your dues, you’ll get the best credit cards later.

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