Best Student Credit Card
- Advantages and Disadvantages of a Student Credit Card
- Requirements for a Student Credit Card
- What Makes a Good Student Credit Card?
- Tips for Using a Student Credit Card
- The Takeaway
Some college students are so focused on getting good grades, graduating and beginning their adult life that they don’t give much thought to their financial health. But college is an excellent time to develop money management skills and build credit in preparation for the future. This is why some students get a credit card while in school.
But although student credit card accounts are offered by many banks, there are a few things you need to know before submitting an application.
Advantages and Disadvantages of a Student Credit Card
Some people could argue that a college student doesn’t need a credit card. But the truth is, getting a credit card at a young age has its advantages, as well as its disadvantages.
One of the main advantages of getting a student credit card is the ability to build credit as a young adult. Credit is crucial if your future plans include financing a car or buying a house. To get a mortgage, you’ll need a two-year credit history. So the younger you establish a credit history, the easier it’ll be to qualify for a home loan upon graduating and getting a job.
A credit card is also useful in an emergency. Even if you’re responsible with money, unexpected expenses can catch you off guard. A credit card can provide funds during these times. Keep in mind, however, a credit card is by no means a substitution for building an emergency fund. Therefore, open a savings account and regularly contribute at least 10% of your income into this account every pay period. By doing this, you can also develop a savings routine early on.
Unfortunately, getting a credit card at a young age can also cause problems. Some young people don’t know the first thing about credit management, so there’s the risk of maxing out an account and accumulating debt. And if they can’t pay their debt, this can lead to a negative credit history.
It takes time to rebuild a bad credit score, so learn the ins and outs of credit management before applying for an account.
Requirements for a Student Credit Card
Although student credit cards are widely available, you can only get an account if you meet the issuing bank’s requirements. In the late-90s and early-2000’s, getting a credit card as a student was easier. As long as you attended a college or university, you could pick up a student credit card application on campus, apply for an account, and get approved for a card
even if you didn’t have a job. This led to a lot of students getting into massive debt.
The Credit Card Act of 2009 modified the rules regarding student credit cards, making it harder for students to acquire credit cards. So while getting a credit card as a student isn’t impossible nowadays, you must meet certain requirements.
- You must have income. Before you can get a student credit card, you must be employed and provide the bank with proof of income. The issuing bank has to ensure your ability to pay your monthly bill. If you don’t have a job, you can’t get a card. So if you’re thinking about building credit with a student credit card, look into getting a part-time job while in school.
- You must be at least 21. Not only will you need income, in most cases, you need to be 21 years or older to qualify for your own credit card.
- You need a cosigner if you’re under 21. If you’re at least 18 but under 21, getting a credit card to build credit requires a cosigner. This can be a parent, a sibling or another relative over the age of 21 who agrees to be held responsible for this debt if you can’t pay. Cosigning is dangerous for the other person. The way you manage the account can have a positive or negative impact on their credit score. Before asking someone to cosign a credit card for you, make sure you’re in a position to pay your bill on time every month. If someone agrees to cosign for you, don’t hide payment problems from them. Notify the person if you can’t pay a bill. This gives them an opportunity to submit the payment and protect their credit score.
Another perk of a student credit card is that you don’t need a prior credit history. This is different from other types of credit cards that require established credit. Getting a student credit card with bad credit is slightly harder. You may not qualify for an unsecured card with bad credit, but you might qualify for a secured student credit card. These cards require a security deposit.
What Makes a Good Student Credit Card?
Student credit cards are not created the same. Each card has its own set of features and terms. Shop around and familiarize yourself with different cards to determine the right one for you. Features to examine include:
- Interest rate. Compare multiple student credit cards to find one that offers a lower APR. This is important, especially if you’ll carry a balance from month to month. A low APR reduces how much you pay in interest every month. Be aware that some student credit cards have higher interest rates compared to other cards. So while you shouldn’t expect a super low rate, comparison shopping can be the difference between paying 22% interest and 18% interest.
- No annual fees. As a college student, your income might be limited, and you might look for ways to reduce expenses. Therefore, search for a student credit card that doesn’t charge an annual fee. Annual fees are common with credit cards offering a rewards programs. If you’re narrowing down your search and can’t decide between a card with an annual fee and a card without an annual fee, compare the benefits of both cards and then decide whether the annual fee is worth the cost. If you must pay an annual fee, choose a card that waives the annual fee for the first year. This way, you can take the card on a test run to see if it’s the right one for you.
- Some student credit cards offer programs that reward you with points, miles or cash back for usage. If you plan to use a credit card often, get one that offers a rewards program. This way, you get something in return. Redeem points or miles for airfare to visit family, or redeem accumulated points for gift cards when you need to do a little shopping.
- No foreign transaction fees. If you travel abroad during your spring or summer breaks, make sure your student credit card doesn’t charge a foreign transaction fee. This fee is added to every purchase made in another country, and the cost adds up depending on how much you use the card. Foreign transaction fees are usually 3% of every purchase
- Extra benefits. As a new credit card user, you might be unaware of cardholder benefits. To learn about these benefits, read the credit card application to understand how to get the most out of the card. Look for a card that offers price protection. With this purchase, if you make a purchase and find the same item cheaper elsewhere within a certain timeframe, your credit card company may pay you the difference. Also, look for credit cards that include a free extended warranty when purchasing electronics with the card.
Tips for Using a Student Credit Card
Getting a credit card as a young adult doesn’t automatically result in a good credit score. You’ll only build a solid credit history if you know how to use the card. Here are a few tips for success.
- Know your credit card terms. This includes minimum payment requirements, fees, grace periods, rates, etc. Always read the fine print of credit card applications so you know what to expect and you don’t encounter surprises. Also, look up any terminology that you don’t understand.
- Avoid cash advances. Some credit cards give a cash advance option. You can take the credit card to an ATM, enter a PIN and get cash. This is tempting but avoid cash advances. Cash advance interest rates are higher than standard purchase rates. If you only make your minimum payments and don’t pay off a cash advance immediately, you could end up spending hundreds in interest.
- Pay your bills on time every month. Late payments will result in late fees, and lateness can damage your credit score if the issuing bank reports the delinquency. Once you get a credit card, make a note of your due date, and always pay the bill on or before your due date. To avoid forgetting a due date, sign up for auto pay.
- Pay your balance in full. Some people make the mistake of only paying their minimum. Never pay just your minimum. Ideally, you should pay your balance in full every month. If you can’t pay in full, submit a payment that’s double or triple your minimum, and stop using the card until you pay it down. If your balance continues to grow every month, it’ll take longer to pay off the card, and you’ll pay a ton of interest
- Keep your account active. You must use the credit card on a regular basis to build a strong credit score. If your account becomes inactive, your credit card company may cancel the card, or stop reporting activity to the bureaus. So even if you prefer using cash or a debit card, put a small purchase on your credit card every couple of months—but only use the card if you already have money for the item.
- Use the card often to accumulate reward points. If you have a credit card with a rewards program, use this card for everyday expenses such as groceries or gas. Some students even use their credit card to pay for books and other school supplies. But again, only charge what you can afford to pay off in full every month. To maximize the number of reward points you earn, shop for gifts and make travel arrangements through your credit card’s shopping portal. Here, you can earn more points or cash back per dollar spent.
- Never lend out your credit card. Your credit card is your responsibility and you’re obligated to pay for all purchases made with the card. Therefore, never lend a friend your credit card. If a friend charges up the account, and you gave them permission to use the card, you’re responsible for these charges if they refuse to pay.
- Check your credit regularly. There’s the risk of identity theft, which is when someone gets hold of your account information and makes purchases in your name. Make sure you check your credit report at least once a year (or preferably every 3 to 4 months). You can order a free copy of your reports once a year from each of the three bureaus, or visit com for free copies.
- Don’t apply for too many cards. Keep in mind that too many credit inquiries in a short amount of time can hurt your credit score. Once you’re ready to apply for a student credit card, only apply for one card at a time. As your income improves and you learn how to manage credit, you can then apply for additional cards.
- Expect a low starting limit. Because you’re new to the world of credit, the credit card issuer may start you with a low credit limit, maybe $300 or $500. Continue to pay your bill on time and pay off your balance every month. As you demonstrate excellent credit habits, the credit card issuer may gradually increase your credit line.
Learn More about Credit Cards
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- Best Secured Credit card
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Building credit as a young adult can make it easier to get credit later in life. But your ability to assess credit later depends on how you manage your accounts today. You should always take your credit and debt seriously. Remember, a credit card isn’t free money. Only charge what you can afford, pay off your balances every month and regularly monitor your credit history.