Are Student Credit Cards Dangerous To The Economy?

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Student credit cards are the stepping stone of one's entry into adulthood. Banks have recognized that they can help build a foundation of responsibility by offering credit cards to students. It also builds a lifelong trust between students and the banks that offer these cards. Most of the students who apply and receive credit cards from banks, go on to become business professionals. Financial institutions realize that is extremely important to develop relationships with these future business leaders of tomorrow.

Statistics clearly show that after graduation, students tend to stay with their respective credit card companies for very long periods of time. This is a crucial fact that financial institutions have learned through years of research. It is because of this, that credit card companies have continued to increasingly develop and target ad campaigns directed at students. It has become easier than ever, for a student to apply and be accepted for a student card.

Many industry experts feel that it is extremely dangerous for financial institutions to offer credit cards to students. Some say, that it is due to the fact, that the credit limits are often based upon what the credit card company feels the student will earn in the future and not what they currently earn. Most students, while in school, have little to no income, and have almost no credit history whatsoever.

Students who apply for credit cards also tend to spend their money on items that are not long term, such as entertainment, food, and living expenses. Studies have shown, that many students disregard the credit card debt after graduation. This is primarily because the majority of their credit balance was spent on intangible items. This leads to a "why should I continue to pay for something that I no longer have" justification. Given this fact, many financial institutions have seen a higher number of defaults on their student credit cards. Most students don't default on their credit cards, however, the students that do default, have placed a tremendous financial burden onto the banks who carry the debt.

The real question shouldn't be: "are student credit cards dangerous for the economy?", but: " is the economy dangerous for students?" Why would a student even need a credit card? The simple answer: school tuition and living expenses. Schools have become outrageously expensive these days. College costs have increased faster than inflation for the past eleven years, according to the College Board, which is a non-profit organization of schools, universities, and colleges. Many students are asking why they have to go into debt to earn an education?

So here's the question again: are student credit cards dangerous to the economy? It all depends on how you look at it. On one hand, it teaches self reliance, builds credit, and allows students to enter into the financial marketplace. On the other hand, the student credit card can cause bad spending habits, create a bad borrowing history, and cause students to become slaves to the debt. So whether or not student credit cards are dangerous to the economy, is really dependent on the individual student. It all comes down to the character of the borrower. Student credit cards, if used prudently, can build a bridge to financial success, but if used unwisely, they can become a burden to the economy and a stumbling block to a student's chance at a responsible financial future.
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