Enrolled in school and contemplating whether to get a student credit card? Student credit cards are tailored for young adults with limited credit history, offering a convenient way to make purchases and establish credit. While advantageous, they come with certain considerations.
Learn about the pros and cons of student credit cards to make an informed decision about their suitability for you.
What Is a Student Credit Card?
A student credit card functions like a regular credit card but targets younger individuals without extensive credit backgrounds. Providing the convenience of a credit card, it facilitates purchases, particularly online, while aiding in credit history and score development. These cards typically feature lower credit limits and higher interest rates.
To secure a student credit card, applicants generally need to:
- Be at least 18 years old
- Be a U.S. citizen or possess a Social Security Number
- Be enrolled either full-time or part-time at a qualifying school
- Have some form of income or a co-signer for the application
- Not have poor existing credit
Student credit cards generally offer lower credit lines and spending caps to lower the lender’s risk. This restricted limit eases repayment and minimum monthly payment obligations for students.
The credit limit is determined by the bank or card issuer based on factors like your credit score, income, expenses, and existing debt.
The Upsides of Student Credit Cards
Student credit cards offer various benefits, including aiding credit building, providing emergency funds, and potential rewards.
Builds Credit
By using a student credit card, your account activity is reported to major credit bureaus, shaping your credit reports that determine your credit score. Lenders use this score to gauge financial responsibility, impacting future milestones like buying a car or home. Maintaining timely payments and a low credit utilization ratio can foster a strong credit score.
Credit scores typically range from 300 to 850, with scores over 670 considered “good.”
Emergency Funds
Students lacking an emergency fund can use a credit card for unexpected expenses like repairs.
Potential Rewards
Student credit cards may offer rewards like cash back or discounts at select retailers, enhancing their appeal.
The Downsides of Student Credit Cards
Despite their advantages, student credit cards carry limitations such as smaller credit limits, higher interest rates, and potential annual fees.
Lower Credit Limits
Student credit cards typically feature much lower credit limits than traditional ones, curbing excessive spending yet potentially hindering emergency use.
Routine expenses like books and groceries charged to the card can accumulate quickly, impacting your credit utilization ratio.
Higher Interest Rates
Student credit cards often carry high variable interest rates, exceeding 20%. Regular payment of the full balance each month can mitigate these costs.
Additional Fees
Student credit cards commonly impose fees like annual fees, foreign transaction fees, and late payment penalties, although comparison shopping can reveal cards with fewer or lower fees.
Risks
While having a smaller balance cap, mismanagement of a student credit card can still harm your credit. Regular payments, conscious of your credit utilization, can safeguard your credit score.
Access free copies of your credit reports at AnnualCreditReport.com.
Shopping for a Student Credit Card
Student credit cards are widely available, with banks that issue regular cards also offering student-oriented options. Investopedia assists in selecting an appropriate student credit card, regularly updating a list of the best cards in the market.
For those ineligible for a student credit card, secured credit cards represent an alternative. By placing a deposit equal to the credit line, users can access secured cards, potentially transitioning to unsecured cards with timely payments.
Which Card is Best for Students?
Opt for a student credit card with competitive rates, a suitable credit line, no annual fees, and potential for extended credit consideration after a probationary period.
Can a Student Qualify for a Credit Card?
Students can qualify for credit cards but must meet age and credit score requirements. Lenders may have additional criteria in place.
Can I Get a Student Credit Card if I’m Not a Student?
Most student credit cards mandate school enrollment, but some issuers may offer exceptions. For example, Chase’s Journey Student Card extends beyond students, allowing broader eligibility.
The Bottom Line
Student credit cards offer substantial advantages for young individuals seeking to establish credit. Use them responsibly to nurture credit and enjoy efficient payment methods. Before acquiring a student credit card, explore various options, comparing rates and terms.
