What is a student credit card?
Going off to college is an exciting adventure; the same can be said about choosing your very first student credit card. You will be experiencing your first stretch of independence, away from home, away from your parents and you will have to take care of yourself in a way that you never have before. A student credit card is a credit card designed specifically for those who are in school and who have very little in the way of a credit history.
There are a lot of expenses associated with college and you will probably have to find different ways to pay for these expenses. Most students apply for and get student loans, financial aid, etc. What’s more, many students will also find part time jobs so that they can pay for books, housing, food, etc. However, many of these expenses are too much for a student to pay up front and this is where a student credit card can come in very handy (although it is very important to only use student credit cards responsibly).
Many people do not realize that there is a difference between a student credit card and a standard credit card. While both types will have the same logos (Visa, MasterCard, AMEX), a student card usually offers different terms, higher interest rates, and lower limits. This is because a student will be establishing their credit for the first time and because they do not yet have a credit history, they will find that financial institutions are less willing to gamble on their credit until they have some established.
The Difference Between a Student Credit Card and a Regular Credit Card
The first thing that you need to understand is that some of the difference may not apply to each card. By using our free credit card finder tool you will be able to find out first hand who has what kind of terms, better rates, etc. However, you will find in a majority of the cases the following rules will apply to your student credit card.
As mentioned above, because, as a young person, you have not established any credit for yourself, you will find that your interest rates will be higher on a student credit card than a standard credit card. You can expect to find interest rates starting in the 17.49% range, increasing from that point.
In many cases, you will be required to have a co-signer for your student credit card as well. Typically, this will be a family member, but that is not required. One thing that is very important for you to remember is that as a co-signer that person will also be responsible for your credit card. If you neglect your payments, they will receive negative reporting on their credit history as well. If you maintain your credit card then they will receive a positive report from the credit card company. If the person who co-signs for you has excellent credit, you may find that your interest rates decrease and that you will have a larger starting balance.
Establishing Credit Before You Get Your First Student Credit Card
If you want to establish some credit for yourself before you get your first real credit card, then you have one of two options. You can get yourself a prepaid or secured credit card or you can establish some credit by getting a department store credit card.
Prepaid credit cards are loaded with money that you provide, sort of like a bank account. However, because it is a legitimate credit card
the company will submit your information to the credit reporting agencies using your initial balance as your credit limit. For example, if you decide to deposit $500 on your card then that will be your available balance. Each time you spend money using your prepaid credit card it shows your available balance lower but your maximum balance will still be $500. Most, but not all, prepaid cards have a maximum balance of $500.
Department store credit is another way to establish your credit. Historically, department store credit is easier to get than regular credit; however, your interest rates will usually be much higher from department stores than from a regular credit card company, so use this type of card with caution.
In either case, because of new credit card laws, if you are under the age of 18, your parents will have to sign an agreement allowing you to get a credit card. While establishing some credit first is a great idea, without your parent’s permission, you will have to wait until you turn into a legal adult.
What to Look for From the Best Student Credit Cards
Whether you have established a little bit of credit or not by using other methods, you will very likely need a credit card while you are in college. Something you should realize is that a credit card is not a good source for paying tuition, student loans will have a much lower interest rate and you can defer those after graduation if you need to. Once you have used your credit card you are obligated to pay off your balance.
There are companies who specialize in student credit cards but this does not necessarily mean that they are the very best company for you to use. You will want to check for specific things, for example, you will want to get the lowest interest rate possible. Some company’s offer a lower interest rate but has annual fees associated with the card. You can find calculators online that will figure out which option is the best for you. These calculators will figure out how much you would pay for your interest rate with your card maxed out (or at any amount you desire) annually so that you can compare that price with the annual fee.
You should always check the fine print on an offer as well. Many companies have very stringent rules about missing a payment, for example, they may raise your interest rates exponentially if you miss a single payment. Others will close your account if you miss a payment, which not only means that you will no longer have a credit card to use but your credit will be affected negatively as well, even if you pay off the credit card.
You will want to check all of the fees associated with making cash withdrawals, if there are any monthly maintenance fees, late payment fees, bounced check fees, etc. Every one of these fees can make or break a deal and some companies have very good fees while others charge the maximum allowed in the state where you live.
Lastly, choosing the right student credit card means comparing agreements from different companies. In the past, this was a long and arduous task. However, with our chaser tool all you have to do is tell us what you want and we will find it for you. You then compare the terms and make your decision without trying to track down all of the available offers for yourself. Check out our free credit card finder tool on our home page right now!