What are the Benefits of a Student Credit Card?
Let's Learn About: Student Credit Card Benefits
Student credit cards help students build credit history
Some student credit cards offer cash back or miles rewards
Student cards may offer no annual fee or no foreign transaction fees
A student credit card is a fully functioning credit card that is simply geared to students who are new to credit. A student card offers a great way to move into the world of financial independence.
The benefits of a student credit card can include financial education and resources that are available online, via app or by phone; support in developing good payment habits, in the form of alerts and reminders from your credit card issuer; and cash back and other rewards that are specifically geared toward students. It all depends on the student card you get! Perhaps most importantly, lenders may grant lower limits to students that will allow you to start building your credit history.
Here’s what students, parents and recent graduates might want to know when considering student credit cards:
What is a student credit card?
Student credit cards are specifically designed for college students with limited credit history. The best student credit cards may have no annual fee, cardholder benefits and perks such as a rewards program.
To obtain a student card, you will need to submit proof of full- or part-time schooling, you must be at least 18 years old with proof of income or assets, and meet any other criteria that the issuer needs to evaluate your application.
Student credit card benefits
Student cards help you build credit history
A student credit card can help you build your credit history (if used responsibly). A good credit score makes you a more attractive applicant on a lease for a place to live, and can even affect your access to cell phone plans. If you apply for a mortgage or car loan, the lender will check your creditworthiness to ensure you’re a good bet to make payments, in full and on time. You stand to save in interest payments if your interest rate is lower due to your good credit.
To start, make small purchases and be sure to pay your balance in full every month. By doing so, you not only avoid paying hefty interest charges and late fees, you also develop positive financial habits and may be able to build a healthy credit score. Those are just some of the benefits of a Discover student credit card. Here’s another: The seemingly small habits you start today when managing your student credit card can add up to big results over time, including helping you build an enviable credit history. Why is that important? For starters, having good credit can help you get the best terms and interest rates on any loans you may apply for down the road. It can also open doors for you (literally) when you’re looking for a place to live, whether you’re applying to rent an apartment or for a home mortgage. That’s something your future self will thank you for.
Starting a credit history in college might benefit you in the future — but, just like toning muscles or learning to play an instrument, building a solid credit history takes time and consistency. With a student credit card, college students may begin to understand the concept of a credit limit and how much available credit they have at a given time, as well as not going over the credit limit. Using a student credit card allows you to create your own responsible bill-paying habits. Be warned that any irresponsibility on your part may be reflected in your credit score.
Student credit cards may offer rewards
Credit card issuers offer a variety of student credit card options. One starter credit option to consider is a Discover student credit card. Among the many benefits of a Discover student credit card is that they let you earn cash back rewards in college while building a credit history to help you after graduation. That is, if you use it responsibly. All with no annual fee.
How to choose a student credit card
Choose one card that works for your situation and avoid signing up for additional lines of credit at every retailer you shop at. Signing up for multiple credit cards in a short period of time may have a negative effect on your credit score regardless of how responsibly you use them. Consider these questions before choosing a card:
Q: Do you have a scholarship or financial aid? Scholarship funding and financial aid checks often come in a lump sum at the beginning of a semester. If you trust yourself to keep your spending in check, this can provide an opportunity to earn a lot of points on a credit card that offers rewards or cash back. You can use the card and pay the full balance each month from your funds. Manage this well and you could have points to help pay for a flight home for the holidays depending on your redemption options. However, if you find you have a hard time managing your spending throughout a semester, you may be better off with a different card.
A: Consider a rewards card
Q: Are you working your way through college? Making ends meet and still making grades is a big challenge for most students who work part or full time while earning a degree. No one should sign up for a credit card with the intention of running a balance, but the reality of a working student is that there may be a month where an unexpected car repair forces you to carry a balance until you can pick up some extra shifts. A card with a low introductory interest rate can help keep you out of financial trouble while you’re working toward your goals.
A: Consider a card with low introductory interest rate.
Q: Are you planning on studying, traveling or working abroad? Fees kick in when you’re overseas and handling money. For example, ATMs might charge extra fees to take out cash in a native currency. Foreign transaction fees are just what they sound like — fees levied when making transactions, meaning making purchases, when abroad. Some cards waive those fees. Others offer miles on hotels and airlines internationally, and some cards offer trip insurance should plans change
A: Consider a card with no foreign transaction fees.
Similarly, if you are heading off to an out-of-state college or university, that’s another reason to look into cards that offer airline miles and travel rewards. By accumulating miles on purchases, you could make it home for a visit sooner than you think.
Student credit card drawback: You need to be a college student
Remember that when you apply for a student credit card, you may have to provide proof that you’re enrolled in college. If you’re no longer a student and you’d like to begin building credit history, a secured credit card may be an option. It also can be a way to bounce back if you are looking to rebuild your credit. You pay a deposit up front, which serves as your credit limit, and will cover the credit card company’s losses if you’re unable to pay your bills. If you demonstrate responsible credit management across all of your cards and loans, you may qualify for an unsecured credit card, or, in other words, a traditional credit card that does not require a deposit.
If you decide to apply for a secured credit card, you may want to choose one that reports to all three credit bureaus (Experian, TransUnion and Equifax). This will allow you to establish a credit history.
A student credit card, if you’re eligible, could be a better option since no deposit is needed. However, if you’re no longer in school, taking a pause in lessons, or you have damaged credit, a secured credit card could be the way to go.
Student credit cards can have long-lasting benefits
As students transition out of school and into the workforce, many of those good financial habits that started, and continued, with managing a student credit card can also transition into good lifetime financial habits.
Take the platform you’ve built with an early and solid credit history via that well-thought-out student credit card and turn it into a good apartment, low interest loans, and more money for future savings — you can start to see how it all lines up.
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