Best Student Credit Card vs. Prepaid Debit Cards

College is an exciting time of setting goals and reaching new vistas of learning. Upon completion of their first year of school, most college and university students will tell you that they have already learned a whole lot about how to study smarter, what they want to do when they graduate, and - for those who choose to move away from home during college - how to survive and thrive while living on their own.

Whether a student chooses to continue to live at home or to live in a dorm or off-campus apartment, they have ample opportunity to polish one of the most important life skills that a person can master: that of personal finances.

One way that college students choose to manage their personal finances is through the use of a credit card. If you are looking for the best student credit card, consider such card features as:

• low interest rate
• cash-back bonuses for the purchase of certain goods
• no account setup fee
• no annual fee

Having a credit card while in college is particularly useful to help a student deal with emergency situations, such as having to pay for a last-minute plane ticket, emergency medical expenses, or car repair. However, many students get into the habit of using their credit cards for everyday purchases. There is nothing wrong with this approach, provided that they have the means to completely pay down the balances each month.

However, using credit cards for regular purchases can get students into real trouble in the sense such usage can result in their running up too much credit card debt. For example, a recent Sallie Mae study found that the average graduating college student carries about $4,100 in credit card debt. And, many college students who graduate with high credit card debt have trouble paying it down - even months or years after graduation.

For decades, the beefed-up marketing departments of credit card companies have been pursuing college freshman in an effort to get them signed up for a new credit card. They have used incentives such as free giveaways and other deals to get them to sign up.

However, starting in early 2010, new congressional legislation has made it illegal for credit card companies to pursue new contracts with students from within 1,000 feet of any campus. This means that students are no longer being hounded on campus by companies who want to get them signed up for new cards. In addition, the legislation requires students to have a cosigner on the cards, such as a parent or guardian.

Of course, many students are still finding loopholes to get approved for cards (e.g., by asking a graduate student or other friend to cosign on the card). The bottom line is: if you are a college student who wants a credit card, you can probably get your hands on one. But, at the same time, you should consider other alternatives given the inherent financial risks of over-reliance on cards.

In order to avoid the kinds of debt burden problems that many college student-uesrs of credit cards have faced over the years, some college students (and their parents) are switching to prepaid debit cards instead of credit cards. Prepaid debit cards have the following attributes:

• feature the logo of major credit cards like American Express, Visa, and MasterCard
• can be used to make purchases anywhere a major credit card is accepted
• are used by starting out with a prepaid balance; as purchases are made, the balances approaches zero
• can be replenished at any time, either online or via direct deposit
• no application required
• no credit check required
• cannot be abused (beyond whatever denomination they start out with or are refilled with)
• balances can be checked online
• just like a credit card, prepaid debit cards can be immediately de-activated via phone if lost or stolen to prevent unauthorized use

The most important advantage of using this type of card for university expenses is that there is no possible way to incur debt via the use of these cards. This is what makes them ideal for day-to-day purchases by college students for items like food, apartment/home supplies, clothing, books, and even entertainment and social activities.

One use-case scenario to consider: if a parent has agreed to pay for all or a portion of their child's ongoing living or educational expenses, the parent can purchase and refill (when necessary) the prepaid debit card instead of sending the student cash or paying the monthly credit card bill. The parent and student can both track expenditures to make sure the card is being used responsibly.

Find out more about prepaid debit card use in college at: Prepaid Debit Card Warehouse.