Student credit cards allow for students of age to start building their credit history in a responsible way. The federal government places additional regulations to credit card issuers offering credit cards to students. The restrictions are placed to anyone under 21 years of age who must have proven independent ability to pay off debt or has an adult co-signer that agrees to jointly be responsible for the account.
A student credit card can help on the road to gaining financial independence and allowing for securing loans for home or car or other major payments. However, a student must use credit cards responsibly otherwise this can lead to a long road of lead collection calls and sleepless nights.
Student credit cards are targeted to the first-time card holder and come in two options: secured or unsecured. Unsecured student credit cards are very similar to regular credit cards except come with much smaller credit lines which can be repaid in full or through minimum monthly payments. You can also get the usual incentives such as cash-back rewards, sign-up bonuses, or introductory 0 APR.
As first-time credit card holders, students are treated as high risk customers until they have proven they can handle a credit card responsibly and create a history of regular on time payments. Until then, if you are a student, you can expect to pay high interest in addition to a low credit line, which will make having credit card debt very costly.
The option for a student credit card is a secured card. In this case, you will be required to make a deposit to secure a line of credit. Without having a history of credit, you will find it easier to be accepted for a secured student credit card, as opposed to unsecured. By having a secured card and establishing a credit history, you have a much better chance of being accepted for an unsecured credit card later on and even at a better interest rate.
Either option you decide on, keep it to one card only. Applying for multiple student credit cards will lower your credit rating. Also, make sure you don’t incur additional fines such as late payments or over the limit. Stay away from cash advances which has a higher interest rate. Stick to this golden rule: pay off your credit card debt in full and on time. This will go a long way to building a solid credit history and securing financial freedom in the future.
