After the grace period, however, the cardholder gets a raised credit limit and a raised interest rate. Tack on an 18 percent interest rate and suddenly a student is spending a lot more money than he or she is earning. Often students receive cards in the mail that are pre-approved with a low credit limit. After one card, another card comes. Now a student has multiple cards, multiple creditors with multiple bills being paid at different times and most often at inconvenient times.
Creditors make money from the cardholder.
When a purchase is charged to a credit card, the cardholder pays interest on the charge plus paying for the amount charged. If all payments are made on time, good credit is established, but if payments are late or not received, then interest is added on back payments, quickly making a credit card bill into a credit card debt. When a student starts charging items to the card irresponsibly, the debt increases. Emergency situations often break a credit card's limit. Car accidents or other unforeseen emergencies that plague everyone put a student in a vexing financial situation.