As a student, gaining approval for a regular credit card can prove challenging due to your limited or non-existent credit history. In such cases, student credit cards or secured credit cards can offer a viable solution. Both card types not only provide the convenience of a credit line but also aid in establishing a positive credit history and a strong credit score. Here’s a guide to help you determine which card suits you best.

What Is a Student Credit Card?

Student credit cards are available through major credit card issuers and typically require you to be at least 18 years old and enrolled in a qualifying educational institution either full-time or part-time. You may need to demonstrate regular income or enlist a cosigner, like a parent, to support your application. Meeting these criteria can make acquiring a student credit card a straightforward process.

Similar to other credit card varieties, student credit cards have their set of advantages and disadvantages.

Benefits of Student Credit Cards

• Initiates credit building from an early stage: Regularly paying your student credit card bill allows many issuers to report your payments to major credit bureaus, laying the foundation for a credit history and a credit score essential for future milestones like homeownership.
• Develops financial management skills: By tracking your monthly expenses and cultivating timely payment habits, a student credit card can enhance your financial planning abilities. Furthermore, the deliberately low credit limits offer protection against overspending.
• Emergency utility: In times of unexpected high expenses while away at school, a student credit card can serve as a safety net.
• Additional perks: Some student credit cards offer rewards such as cashback or discounts, providing added benefits beyond just credit usage.

Drawbacks of Student Credit Cards

• Higher interest rates: Student credit cards often carry elevated APRs due to the perceived higher risk associated with student users. Paying off the balance in full monthly can mitigate this impact.
• Limited credit limit: Initial credit limits on student cards are typically modest, which can discourage overspending but may pose challenges during unforeseen major expenses.
• Additional fees: Many student cards feature extra charges such as annual fees, foreign transaction fees, and late payment penalties.

What Is a Secured Credit Card?

Secured credit cards offer an alternative for individuals with scant credit history or poor credit records, including students.

With a secured card, you deposit funds with a bank as collateral, determining your card’s credit limit. Typically, deposits start at around $200, with the option to retrieve your deposit upon account closure.

Benefits of Secured Credit Cards

• Facilitates credit building and repair: Secured card usage, like student cards, allows for credit bureau reporting, aiding in establishing a robust credit history and score through timely payments.
• Potential card upgrade: Consistent on-time payments may lead secured card issuers to transition you to an unsecured card or help in applying for regular cards elsewhere based on your improved credit history.
• Added benefits: Some secured cards provide useful features like credit fraud alerts and monitoring services, although rewards like cashback are less common.

Drawbacks of Secured Credit Cards

• Required security deposit: The deposit, a key factor in securing approval for a secured card, might pose a challenge for financially constrained individuals.
• Additional fees: Some secured cards entail extra costs such as annual account fees and application charges.
• Higher interest rates: Secured cards commonly carry APRs of 20% or higher, emphasizing the importance of paying the full balance monthly.

The Bottom Line

Whether opting for a student credit card or a secured credit card, both can serve as valuable tools for building a credit history, particularly for students. Starting with a student card, which lacks a deposit requirement, and transitioning to a secured card if necessary, can be a prudent approach.