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College is a great time to start building credit with a student credit card. Your GPA is an important number to pay attention to while you're in school and so is your credit score. The best student credit cards fit your needs while helping you build a strong credit history. By the time you leave school, you can have the kind of credit that can help you get great rates on loans and your pick of credit cards. Read our guide on the best student credit cards to get started.
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A student credit card is a card intended for college students. Student cards have lower income and credit history requirements than most other credit cards. They can also offer benefits specifically tailored for students, such as bonus rewards for maintaining good grades. Plus, many student cards offer purchase rewards, such as cash back or travel rewards. Some may even come with a small welcome bonus.
Unlike a regular credit card, you can typically get approved for a student credit card with no credit history. Card issuers understand that student cards are often people's first credit cards. You do need income to qualify for any type of credit card, including a student card. This can include income from a job, as well as money from grants and scholarships. For someone looking to get student credit card with no income, you'll need a cosigner on your application.
Student cards are also unsecured credit cards. This means you won't need to make any kind of deposit to open a student credit card account. In contrast, a secured credit card will require a deposit to secure your credit line. While a secured card is a good tool for building credit, this gives student cards the edge when considering student vs. secured credit cards.
One thing to note is that student cards often lack the ability for non-purchase transactions like a balance transfer or cash advance. Consider this a good thing: It'll help you avoid getting into trouble before you even get the hang of credit. A college student credit card is just as much a learning tool as it is a payment device.
A student credit card allows you to borrow money from a line of credit to make a purchase, then pay back what you borrowed later. Your card will have a credit limit, which is the most that the bank will let you borrow at any one time.
For example, imagine you have a student credit card with a $500 credit limit. You spend $100 on textbooks, and $50 on other school supplies. That leaves you with $350 of available credit.
After that month's billing cycle ends, the card company will issue your monthly statement. This will show all of the purchases you made during the last statement cycle, as well as your ending balance. It will also include your minimum required payment and your bill's due date.
Your minimum required payment is the minimum amount you need to pay to the credit card company to avoid late fees. It's typically a small percentage of your balance (2% to 3%) or a flat fee -- usually $25 or $35 -- whichever is higher. As long as you make at least the minimum payment, your account will remain in good standing.
However, if you only make your minimum payment, you'll be charged interest on your purchases. Interest fees are based on your credit card's APR, which you can find in your card's terms and conditions. To avoid being charged interest fees, be sure to pay your entire statement balance before your due date.
You can learn more about how a credit card works in our beginner's guide to credit cards.
The best student credit cards share a lot of the same features. When comparing credit cards, look for some of these stand-out features:
If you're still on the fence between two cards, consider extras like customer service and bonuses for good grades. You may also be interested in a student credit card with a good mobile banking app if you want to check balances and make payments on the go.
Yes! One of the things that sets student credit cards apart is that they are specifically designed for students who are new to building credit. This means you won't need any kind of credit history when applying for a credit card for students. If you use your new student card responsibly -- paying it on time every month and keeping your balances low -- you'll build credit over time.
The whole point of getting a student credit card is to start building credit and increase your credit score. So, you'll want to make sure you're using your student card responsibly. Here are a few tips for making the most of your student credit card:
Once your graduate, your credit will likely help you get a bigger and better rewards credit card. But that doesn't mean you should cancel your student card. The longer you let your first credit card age, the more it will help you credit. That's because the length of your credit history is a part of your credit score -- 15% of your FICO® Score -- and a longer credit history will help your score continue to grow.
Student credit cards work like any other unsecured credit card. The cardholder has access to a revolving line of credit that allows them to make purchases now and pay them off at a later date. The amount you can purchase will be limited by the size of your credit line, also known as your credit limit.
Every billing cycle, the credit card issuer will send you a statement with your transactions and any previous unpaid balance. You can choose to make a minimum payment, pay the full statement balance, or pay a different amount. Paying your full balance will allow you to avoid being charged interest fees. As you pay down your balance, you'll have more available credit you can use again.
You don't need any credit history at all to apply for a student credit card. That's because student cards are specifically designed to help college students build credit. Paying your credit card on time every month can help you build a positive payment history, which is a big part of your credit scores. Over time, responsible credit card use will lead to good credit scores and better credit opportunities.
Finding the best student credit cards for you is a matter of comparing the options. Look for a student card with no annual fee and helpful credit tools, such as a card that reports to all three credit bureaus and offers free credit scores. You may also want a student card that offers purchase rewards like cash back on dining and gas purchases.
What considerations should students be aware of before getting a credit card?
The most important thing to keep in mind is that credit cards are not free money, but rather a form of debt that has to be paid back. There are credit cards specifically targeted for students, and students wanting to have credit cards should get those, instead of just any credit card. These student credit cards may have restrictions like lower credit limits, but they also provide the opportunity to learn how to manage credit. Besides, some student credit cards provide some financial rewards, especially if students get good grades and maintain particular grade levels. Some credit cards provide credit monitoring services for free, and that ought to be another consideration while selecting a card.
How should college students pay credit cards off?
The awareness that credit cards are a form of debt and ought to be paid off will allow for their reasonable use which is the key to paying credit card balances. Students have a limited supply of funds, and low statement balances would be easier to pay off then higher balances. Part-time work, financial support from parents, and, depending upon the amount, scholarship money could be used to pay off balances.
What happens to student credit cards when you graduate?
Well you certainly do not have to cancel the student credit card. The issuer of the student credit card could either reclassify or roll it into a new card. The process is seamless and may include perks not available for the student version credit card.
(With assistance from Christina Ntova)
What factors should students consider when choosing a credit card?
Choosing a credit card in the present world is challenging, especially for students, as most do not have previous experience or knowledge; millions of catchy advertisements can sway them to an uncertain choice. First, we examine students who plan to pay the balance on time. These students usually focus on annual fees (generally, cards with no annual fees) and the associated perks. Credit cards offer perks such as points, cash back, no currency conversion fees, rental car insurance, extended product warranty, lowest price matching, and trip cancellation insurance.
If a student does not plan to pay the entire balance each month, they should pay more attention to the usual factors. These credit card details include interest rates and late fees, balance transfer fees (when changing credit cards), cash advance fees, foreign transaction fees, etc.
In sum, a student would need to examine their expenses (many say to track them for one month) or know of any upcoming expenses and should choose the credit card accordingly. They would want to line up different features and see which ones they value the most, and then see which credit card offers those features.
Students also should be wary of applying for too many credit cards at once, as hard credit inquiries can negatively impact their credit score temporarily. (Soft pulls, such as checking your score through an app, do not impact your score.) Usability is another critical factor to note. Is the credit card you choose widely accepted by merchants? Finally, students often look for a frictionless application, meaning Venmo credit cards may become more popular among students. However, because of potential perks lost, a student should take time in selecting the right credit card for them.
How can college students benefit from getting a credit card?
A student benefits mainly by borrowing against future income for expenses now. For example, suppose a student needs to buy a textbook now, but their paycheck will arrive in two weeks; with a credit card, the student can safely make the purchase now. This same thinking also applies to emergencies. An extra benefit lies in the card's statements -- these can serve as proof of purchase if a receipt is lost. The canalso help track monthly expenses so a student can design a budget that aligns with their specific needs and habits.
In addition to money now, two other significant benefits of a student owning a credit card in college are:
What should college students know before making credit card purchases?
Apart from missing benefits or getting charged extra fees, students must have a set budget and not surpass their limit through extreme purchases, even if the credit limit permits it. Always make sure you can pay the total balance, or at least the minimum balance, each month. And remember, getting a new credit card to pay for another is not a good idea; the snowball effect it can create may be greater than you'd expect, and banks are likely to find out.
Lastly, with respect to cash or a debit card, the credit card offers these pros and cons:
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