Guide to Student Credit Cards

Your credit report and score are important in your financial life, whether you’re borrowing money for a house, a vehicle, or lowering your credit card interest rate. You generally don’t have enough of a financial history to produce a credit report if you’re young and still in school. According to the Consumer Financial Protection Bureau, 26 million U.S. consumers—11% of the adult population—were credit invisible, which means they had no record with major credit agencies or their credit history was too restricted to score.

While acquiring a credit card and making regular payments may help you establish your credit, getting accepted may be difficult. Student cards are one option for college students.

What distinguishes student cards from normal cards? We’ll explain, giving you the knowledge you need to pick the perfect card and get you started on the path to good credit.

Key Takeaways

• Twenty-six million Americans, or around 11%, have no credit history.
• A student credit card, which allows you to develop credit while still in school, is one method to start.
• Unlike secured credit cards, there is no need for a security deposit.
• You may get cash back, airline miles, and other such benefits.
• To prevent interest costs, make it a habit to pay your debt each month.

What Is a Student Credit Card and Why Do I Need One?

Student credit cards work in the same way as regular credit cards. They are unsecured, thus no collateral or security deposit is required.

The primary distinction between student credit cards and normal credit cards is their eligibility requirements: student credit cards are developed exclusively for college students, and applicants with no credit history may qualify. A student credit card issued by a bank or credit union may be obtained whether you are a part-time or full-time student.

You are more likely to qualify for a student credit card as a college student than for other types of credit, such as personal loans or vehicle loans. A student credit card may be a beneficial tool while you finish your school, allowing you to pay for important costs while also building credit.

Some credit card companies will enable you to move your account to a normal card when you graduate. If this occurs, you will most likely be eligible for a larger credit limit. Other cards will expire shortly after graduation when your student status expires.

You will most likely be required to produce documentation of your student status, such as a current and valid student ID card, invoice from the institution or university, or transcript, in order to receive a student credit card.

3 Reasons to Get a Student Credit Card

Build Your Credit

You probably haven’t had the opportunity to develop credit as a college student. Your credit history and credit score have a big influence on your life, influencing everything from apartment approval to automobile purchase.

When you create a student account, you are given a credit line, which serves as your spending limit. That credit line raises your available credit, which is equal to your credit line minus any existing bills. If you keep your balances low, you’ll lower your credit utilization ratio—the proportion of a borrower’s total available credit that is presently being used, which affects 30% of your FICO credit score.

Your payment history, which accounts for 35% of your credit score, grows as you use your card and make payments. When you make your monthly payments on time, you create a strong credit record.

Have a Credit Card for Emergencies

You’re driving home when your tire blows out. A family member falls sick, and you must return home immediately. Whatever the circumstances, unexpected costs might occur at any moment. You can rapidly pay the fees if you have a credit card. Depending on where you reside, emergency services, such as towing firms, may require you to pay with plastic, so carrying a credit card adds an extra layer of protection.

Earn Rewards

You may earn rewards on your purchases with a student credit card. For example, the Discover Student Cash Back card offers 5% cash back (up to a quarterly limit) on Amazon.com orders, grocery shops, restaurant meals, petrol stations, and select PayPal purchases. You may also get 1% cash back on anything else you buy.

Remember that incentives are an inducement to spend more. Be astute! Use your credit card only for required purchases to prevent interest charges and excessive debt.

Risks of a Student Credit Card

Student credit cards, like any other kind of debt, have downsides. They often have high annual percentage rates (APR), so if you spend more than you can afford to repay by the due date, you’ll be charged interest. These interest rates are normally about 20%, so charges on delinquent bills add up rapidly.

The fact that credit cards make purchasing items so simple may encourage you to make poor financial judgments and purchase items you cannot afford.

Create a budget based on your monthly cash flow and spending to create financial discipline. Use your credit card only for required expenditures, and always pay off your debt in full each month.

Getting a Credit Card

If you use your student credit card correctly, you may build credit and acquire emergency funding. If you decide to apply for a credit card but aren’t sure where to begin, take a look at our recommendations for the top student credit cards of 2021.

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