Banking Guidance for Students

When students head off to college for the first time, it is vital to have the correct checking account for their needs. Credit card companies are fully aware of this and thus offer all sorts of incentives to sign up with them. But choosing the right bank – especially for those who have never done it before – can be a little overwhelming. Deciding whether or not to get a credit card is also very important.

According to Michelle Smith Source Financial Advisors Manhattan CEO, students should not “feel pressured to open a credit card because [they are] opening a bank account.”

Why is this advice being given though?  What are the issues with credit cards, in particular for students?  One answer is: reality.  There are many promises made to those signing up for a credit that are simply not true such as price deals (which turn out to be not such great deals) and cashback deals (also not all that attractive in reality).  When you factor in interest payments and fees the “deals” can actually be the opposite of “a good deal.”

Managing credit cards can be a challenge.  Why would a student – often away from home for the first time – want to be burdened with tracking debts and payments and managing deadlines every month?  Student life should be a fun experience and the only pressure involved should come from studying, not card management.

Also, if payment deadlines are missed, interest rates can spike to 20 percent or even more. Youngsters often get misled into believing that credit limit is their money, when in reality it is money that the bank is loaning you at a very high interest.

So as Michelle Smith suggests, students should not “feel pressured” to get a credit card.  A bank account is different, but a credit card – as noted in this article – is something quite different.

James Cannon

About James Cannon

James Cannon is an experienced hedge fund analyst. He has served on the advisory boards for various different Fortune 500 companies as well as serving as an adjunct professor of finance. James Cannon has written for a variety of Financial Magazines both on and off line. Contact James at james[at]businessdistrict.com