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. Perhaps most importantly, lenders may grant lower limits and interest rates to students that will allow you to start building your credit history.

Student credit cards offer those benefits and more, but ideally work as part of a holistic approach to learning good money and credit management as a student, and during those crucial first few years after graduation. Here’s what students, parents and recent graduates might want to know when considering student credit cards and best practices:

  1. Why Student Cards Matter
  2. How to Choose a Student Card
  3. Another Option for Starter Credit
  4. Budgeting While in School
  5. Thinking Big Picture

1. What is a Student Credit Card?

Student credit cards are specifically designed for college students with limited credit history. They often have no annual fee, cardholder benefits and perks such as a rewards program.

A student credit card can help you build your credit history. 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 need to take out a business loan, or a car loan, in the future, a bank will check your creditworthiness to ensure you’re a good bet to make payments, in full and on time. You stand to save thousands of dollars in interest payments if your interest rate is lower due to your good credit.

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. According to NerdWallet, two things that can factor into your credit score are your bill payment history and the age of your credit history. Simply put, it can be important to demonstrate a good track record with credit.

College students will 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.

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 the issuer may evaluate your application based on other criteria, as well.

2. How to Choose a Student Card

Choose one card that works for your situation and avoid signing up for additional lines of credit at every retailer and free t-shirt giveaway. 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 enough points to pay for a flight home for the holidays. 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: Choose a rewards card.

Q: Are your parents helping out? If you are receiving help from your parents for living expenses it may be in your best interest to choose a card without a sky-high spending cap. Even the most responsible college student can find that a pizza here and a round of golf there add up to much more than what his or her parent agreed to pay each month. This is especially true if this is your first experience with using a credit card. Having a limit is a surefire way to keep your spending in check.

A: Choose a low-limit 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 interest rate and late payment forgiveness can help keep you out of financial trouble while you’re working toward your goals.

A: Choose a card with low interest

Q: Are you planning on studying, traveling or working abroad? Fees kick in when 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. Not all cards work on all foreign networks, either, so if your plans might include Asia versus Europe, make sure your card is widely accepted throughout that continent.

A: Choose 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.

Q: Are you planning to charge some of your tuition? Some students with scholarship funding or financial aid checks may choose to use a rewards card to pay for college tuition. But some universities do not accept credit cards as a form of tuition payment, or they may pass the processing fee on to the student. It is important to check with your university to make sure they accept credit cards and to understand the fees that may accompany using a credit card to pay for tuition. You could wind up spending more in fees than you receive in rewards points. But credit cards should not be used to finance tuition because student loans may offer lower interest rates and more flexible repayment options.

A: You may want to think twice.

3. Another Option for Starter Credit: Secured Cards

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 give a deposit, which will cover the credit card company’s losses if you’re unable to pay your bills. You’re granted a credit limit, usually equal to the amount of your deposit. 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, 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. In both instances, know that you won’t have a very high credit limit and use these cards carefully.

4. Budgeting While in School

College is a time for learning and personal growth, and gaining control of finances is one of the tools students will need to learn as they start living more independently. Learning how to create a budget is essential for keeping track of the myriad expenses and sources of income that one can have during school. These simple tips can help you build the right college student budget that makes room for both fun and financial responsibility.

  • Track What You Spend. To begin creating your college student budget, have an idea of how much money you’re regularly spending, and what you’re spending it on. To get an accurate picture of your spending habits, you can track your spending for a prolonged period of time—say a month or more. Enter your daily expenses into a spreadsheet, or use an app like your bank’s mobile banking app, Mint or Wally, to help collect your spending info all in one place. With this information available, you can work to create a realistic budget that encompasses your actual spending habits instead of using guesswork.
  • Break It Down. Next, make a list of all of your sources of income in a given month. For a college student budget, this can actually be a little more difficult than it sounds. Be sure to include your average earnings from your job and/or work-study, money from parents or relatives, financial aid, and scholarships. Then categorize your regular expenses, separating them into buckets for things like housing, education costs, food, transportation, and entertainment.

Create your budget by deducting your essential costs first—housing, food, tuition, etc. Look at what money may be left over each month to plan your entertainment budget. While it’s important to include some funds to enjoy evenings out with friends, don’t forget to incorporate monthly savings into your budget, if you can. By putting aside extra money each month, you can prepare for any unexpected expenses that come up in the future.

  • Stick to It. Once you have your budget in place, it’s up to you to keep to it as best you can. Using financial apps like the ones mentioned above can help you keep your spending in check with regular updates and reminders about your progress. Of course, every month is different and your needs will change over time. To help make sure you maintain a realistic reflection of your spending habits and a helpful tool in your pursuit of financial responsibility, take time at the end of each month to revisit your college student budget. Use this time to identify opportunities for saving, account for changes in income, and to continue developing your financial fitness skills.
  • Develop good habits. You can practice the habits that will help you “stick to it” as early as freshman year. Take textbook shopping, for example. Textbooks can cost north of $400 a year. Look online for used books. Try the library — maybe they have copies to loan. Instead of the campus bookstore, try off-campus used bookstores, especially if you are a literature major who might need to stock up on classic novels. See if you can share a book, and expenses, with a classmate. Some services offer to rent textbooks, another option. These creative solutions can pay big dividends in the form of money not spent during a college career, and might inspire some ways to address financial challenges once the cap and gown have been doffed.

5. Think Big Picture

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.

Here are a few ways to keep your good personal finance habits going.

  • Check your credit report. Pull your free annual credit report. Verify the accuracy of your name, address history, Social Security number, the accounts included in the credit report and the reported account activity. Make sure there’s no mistakes on the report, like someone else’s debt on your account, that could bring down your credit score (it happens).
  • Review your credit like a lender. Creditors, lenders, landlords and employers may use your credit history to help estimate the financial risk you present. Your oldest credit accounts can potentially make the most positive impact on your credit score, so having one starting at age 18 is a solid beginning. How much credit do you use each month? A general recommendation is to use no more than 30 to 50 percent of your available credit in order to have an optimal credit utilization ratio, one of the biggest factors used in calculating your credit score.
  • Invest in the Future. The future can seem light years away when you’re still relying on financial help, but it will come eventually. Start making retirement contributions as soon as land a job. The earlier in your life you can begin to save for retirement, the more time the money has to grow and the more options you will have later in life. Start saving when you can for an emergency fund so you have cash on hand as obstacles arise, a car emergency or a job loss.

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.

Originally published March 6, 2015

Updated June 12, 2020

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