Getting A Student Credit Card

What is a student credit card?

A Student credit card is a credit card marketed at college and university students, with the purpose of both establishing a credit score and teaching responsible spending habits.  These credit cards will usually have a lower limit, since students typically have little in the way of credit score.  The lower credit limit is useful for what is likely an individual’s first credit card, as inexperienced users of credit cards can be unaware of the pitfalls of a credit card, such as having to repay promptly and incurring costly usage fees.  Students are thus able to safely build up their credit scores without having as much liability as a standard credit card.

How can you get a credit card, if you need credit to apply for them?

Student credit cards grad class

Credit cards are sometimes preapproved to individuals who pass a credit check.  Since students frequently have little to no credit score, the limit on such cards is much lower than it would be for that of an established consumer with excellent credit.  Students who had part- or full-time jobs during high school may be able to apply for a credit card on their own credit score.  For students without a preapproved card or existing credit score, other options include co-signed credit cards, being added as an authorized user on an existing credit card, and secured credit cards.

What are some of the features these credit cards often have?

Credit cards marketed to students usually share a few characteristics, such as a lower limit, cash back on purchases of food, fuel, and books, and an emphasis on helping the student succeed in being a responsible user of credit cards.  One of the best tools available is the automatic reminder of when to pay bills, as it helps to establish a pattern that will serve the consumer well throughout their life.  Certain credit cards also allow for prescheduled payments, as prompt payments is a key factor in determining credit rating.

What kind of credit cards can a student without credit apply for?

Student credit cards - thinking man

Some credit cards are preapproved to most consumers, but sometimes the student will want a credit card outside their rating.  One option for this is having a co-signer on the account, which will make both parties liable for the payment.  This option is very common for students in America, as there is usually a parent helping to fund their way through secondary education that is able to be a co-signer.  A different option would be to add the student as an authorized user on the parent’s existing credit card, as this would let them gain credit while the parent is liable for payments on the account.  On the opposite end of the spectrum of parental liability, a secured credit card is one where a deposit is made to the financial institution, which in turn allows borrowing from the deposit to the student.  This is the safest type of credit card for students, as there is little way to get in trouble since you’re only borrowing against the principal you’ve invested in the company.

Do I need a credit card if I already have a student loan?

Student loans usually come in lump sums per semester, which means you have a large amount of cash to purchase your books and then plunge into the semester.  A great approach to managing this newfound lump of cash is to put all your purchases through the credit card, and then use the student loan to pay it off each month.  The benefit of this is that it limits your monthly spending to your credit limit instead of letting you burn through the entire student loan in the first half of the semester.  Another sterling benefit to this approach is greatly improving your credit score, through a large amount of small purchases that will be repaid promptly.

Why should students have credit cards?  How does the credit score help after graduation?

Students should endeavor to have a credit card since your credit score will greatly contribute to your success in acquiring loans for cars and houses later in life.  Since credit cards for students often have lower limits, students are able to build up their credit scores with a large amount of small purchases, with the payments sometimes being paid automatically to ensure a prompt payment.  Graduating with a good credit score should be a goal for students, as it sets you up to save a great deal of money later in life via lower rates on credit cards, loans, and mortgages.

What features should I be looking for in a credit card?

Each student has a different financial situation, and some cards are more beneficial than others for different circumstances.  A student who makes many transactions on the card and is able to pay off his or her balance each month would benefit greatly from having a cash back credit card.  Some students who are really interested in heading to Malibu for spring break could use points granted from a rewards or travel credit card to do so.  Students without full student loans might face cash flow problems, so finding a credit card that has a lower APR would be useful if there is a chance you’ll carry a balance some months.  Some credit cards offer an introductory rate of 0% APR for 6 to 8 months, which will help tremendously if you have to pay for your books/tuition with a credit card.  It is very important to pay special attention to what actions will trigger fees, particularly with cash advances.  Many credit cards, especially those with features such as cash back and rewards, have annual fees, so make sure to account for those in fiscal planning.

See what Forbes.com says on how to pick a student’s first credit card.

Should students get a credit card?

All students should seriously consider getting a credit card, if they are able to.  The ability to build a credit score in a safe manner with a low limit and features to remind you of payments due is very valuable.  Credit card companies tend to increase credit limits over time, so good use of a credit card could easily lead to a higher limit that will see you through your adult life.  Since your credit score is responsible for loans and mortgages as well, establishing a good credit score while in college is recommended for avoiding credit score headaches later.

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