Credit Card Terms and Definitions for Students
Learn About Credit Card Terms Associated With Student Credit Cards
Nov 11, 2009
When it comes to getting a credit card, it is imperative that people understand the associated terms set forth by the credit card companies. This is especially important for students entering college who are receiving their first lines of credit. Here is a look at some terms commonly associated with student credit cards.
Co-signer
A co-signer is a person who assumes joint responsibility for the credit that is extended to the main card holder. A co-signer is often used for student credit cards because students have not established a credit history. There are pros and cons to being a co-signer. For instance if the main card holder defaults on his line of credit, then the co-signer assumes responsibility for that debt. Conversely if the main card holder uses the credit responsibly, then he can establish and build credit off of the co-signer.
Pre-paid Credit Card
A pre-paid credit card is a card where the user pays ahead of time for the line of credit. That is to say that the credit card has no value until the credit card holder makes a payment to the card. The payment made by the card holder then becomes the line of credit on the credit card. The advantage to the credit card holders is that they build a responsible credit card history by using the card wisely. Then, the credit card holder may apply for a traditional line of credit.
Secured Credit Card
A secured credit card is a credit card that requires a form of collateral attached to it. Then if the borrower defaults on making payments, the credit card company will assume the collateral to cover the cost of the unpaid debt. Secured credit cards are often for people who have a poor credit history, or like students, people who are trying to establish credit.
Linked Transfer Account
A linked transfer account, in terms of credit card usage, is a credit card that is attached to a checking or savings account. Then if the card holder default and fails to make a payment or overspends on his limit, the money that is owed to the credit card company is "transferred" to cover the outstanding debt. Linked transfer accounts can also be used in conjunction with pre-paid credit cards allowing the card holder to add more credit to their credit card.
Piggybacking
Piggybacking refers to the process of being added as an authorized user on another person's account that already has credit. The authorized user then assumes a portion of the initial credit card holder's credit history. This is often used by parents who are trying to establish credit for students or children as they enter college and move into their twenties.
It is imperative to understand credit card terms so that as the card holder, one can stay a step ahead of the credit card companies. It also allows the credit card holder to use their account in the wisest manner.
Summary
Students are usually receiving their very first credit card and establishing a credit history. Therefore it is imperative that they understand terms and definitions so that they get their credit history off on the right foot.
Additional Credit Card Terms
For more information on credit card terms, check out this article on basic credit card terms, as well as this additional article that discusses even more basic credit card terms.
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