If you think getting into college was a stressful situation, finding the right student credit card can be just as difficult unless you know what to look for. Chances are your inbox has been flooded with offers from credit card issuers all vying for your attention and wanting you to sign up for student credit cards. Some of those cards may even allow you to add your new alma matter’s colors and logo to the card but showing school spirit should not be an excuse to potentially get yourself into debt without knowing how it all works.
What is the difference between a student card and a regular credit card?
If you’ve never had your own credit card before, that’s a valid question to ask. A credit card is a financial tool that can help you purchase goods and services using a line of credit from a financial institution, such as your local bank. You can find a credit card application on your bank’s website or in your mailbox at home, but as of 2009, credit card issuers are unable to market their products within 1,000 feet of a college campus. Thanks to the Credit Card Act of 2009, hungry students can’t be convinced to sign up for a card in exchange for a slice of pizza on their way to class like many of my classmates were years before. Unlike the debit card tied to your current bank account, responsible use of a credit card can result in you getting a higher credit line, which gives you the ability to qualify for bigger-ticket purchases. Having good credit can even be the difference between being able to lease a car and an apartment or having to live at home and have your parents drop you off at class. You don’t want that. What you should want in a student credit card is one that primarily focuses on establishing credit, along with a few other features.
What credit card features should I look for?
As you have little to no credit at this point, it will be difficult to find rewards cards that are loaded with amazing perks like the cards your parents may have. That said, when reading the advertising disclosure for credit card offers you think sound acceptable, there are benefits you’ll want to look out for
- Some student credit cards, but not all of them, offer statement credits if you keep your GPA above a certain level. That caveat should be a given for any students who must maintain their grades for a scholarship or two and gives you more incentive to study, study, study.
- You may be signing up for a credit card in order to afford the items you need to outfit your dorm room. If that’s the case, you’ll want a student credit card with a long introductory APR period so that you have more time pay the balance off at a lower interest rate- sometimes even at 0%. That same strategy applies to credit cards with 0% intro balance transfer periods; ideally, you’d want to pay down your debt at your new, lower rate as soon as you can afford to in order to avoid those higher rates.
- As every dollar counts on a limited college budget, you also want to try to find a student credit card with as few fees as possible. There are cards out there that do not have annual fees or foreign transaction fees, which is great if you’re planning a semester abroad or overseas trip for spring break. Some cards even waive the first late payment fee charge you’d incur, giving you a second chance to start your credit history on the right foot by making your monthly payments on time, each time, without fail.
- Credit monitoring is a fairly common feature in most banking apps nowadays that you should take full advantage of. Whereas many banks will automatically send you a new credit card if they feel your card info has been compromised at a retailer you recently visited, you can go even further beyond in regards to security by enabling messaging directly to your smartphone when your credit card has been charged, when payment thresholds have been hit, and for many other useful reasons you’ll find. Unlike your laundry, this isn’t something that you can ignore until the next time you return to your parents’ home.
Am I Ready for a Credit Card?
Like any other tool, both good and bad can come from credit cards, but those results depend on the person wielding it. If you are already having difficulty paying your bills on time, leaning on credit cards may actually lead to more trouble for you as it doesn’t address your cash flow problem. When it comes to your credit card balance, not paying on time will lead to you having bad credit, making it difficult to qualify for better cards with more impressive rewards programs. You’ll also hurt your credit score if you have a high credit utilization ratio, which is the measurement that card issuers and credit agencies make that estimate your dependency on your credit card. No matter the credit card, you never want to charge the maximum that your credit limit can allow if you can avoid doing so. In fact, 1/3 of your credit limit is generally recommended as the highest threshold that you should hit. So for a student card with a $300 limit, you should try to not charge more than $100 on it at a time before paying your balance as soon as you can. Secured credit cards can also serve as an alternative to student credit cards as a way of building up your credit, though the limit on those cards is solely based on the cash you deposit, or secure, in your account. Another option still is to become an authorized user on one of your parents’ credit cards, which will allow you to piggyback off of their good credit and make purchases using their card while incrementally increasing your own credit score. They’re on the hook for your purchases in this scenario, though, so don’t go wild over the weekend with their card unless you want to have a long and embarrassing conversation soon after. You shouldn’t be afraid of credit cards as a college student, but you should definitely learn to respect them now and build responsible behaviors that will give you some measure of financial freedom in the future. Study your options, and choose wisely.