What is a student credit card, you may ask. They have a key purpose which is specifically to meet the needs of college students. There are some perks they come with which can be more appealing to students who are relatively new to credit. Just like one-time forgiveness for late payment or free year of Amazon Prime for students.
The fact that it is called a student credit card doesn’t mean that every student will automatically qualify for it. If you are below the age of twenty-one, you’ll need to show that you make enough independent income to make payments, or rather consider a cosigner which is only permitted by a handful of credit card issuers. However, if you have other options to consider if you are denied. This includes piggybacking onto a parent’s card as an authorized user.
What Is a Student Credit Card?
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Student credit cards are distinct from the other traditional credit cards in a different way. They have a designation specifically for college students. Unlike many rewards cards, student credit cards do not have sign-up bonuses, and they also have lower credits and credit limits.
This credit card can be a worthwhile first credit card which can help a new applicant build credit from scratch. While you pay off purchases you make every month, you’ll be building credibility so lenders can trust you with a loan in future.
As time goes on, having a good credit score should be your key focus which is around 700 or higher on the FICO 850-point scale. If you need a car loan, you must have a good credit score. And you are more likely to get loans with lower interest rates when you have good credit. Some landlords also request prospective tenant’s credit checks to be sure how trustworthy they are.
As a student credit card user, your credit grows with added rewards such as free credit score monitoring, cash back, or incentives to maintain good grades. This can mean that you earn cash from purchases that you make and build strong habits with your finances at the same time.
How Is Student Credit Card Different From A Regular Credit Card?
You can become a user of the regular credit card once you have grown adequate credit history as a proof that you can handle higher credit limits. As for a student credit card, it helps you get there. Here are the key differences between a traditional credit card and a student credit card:
What To Know About Regular Credit Cards
They Can Be Secured Or Unsecured Credit Cards
The regular credit cards provide users with wide options to applicants with either little or no credit than the student credit cards do. While it is not easy to apply for an unsecured card, a secured card can be of help to one who does not have income or cosigner build or restore credit.
They Come In Diverse Types
Regular credit cards come in different types, depending on the purposes applicants intend to achieve. Balance transfer credit cards are provided to applicants with credit card balance and desire to clear them off within a time-period and without interest. Prepaid credit cards often demand that applicants have some money deposited to be used. Every purchase made is deducted from the card balance. Rewards credit cards can provide users with travel points and cashback.
They Have Relatively Higher Credit Limits
After you have been qualified to use a regular credit card, conventionally, you’ll receive increased credit line access, which also means that you’ll have more credit available. It is however recommended by experts that you ensure not to make use of over 30% of the total credit you receive anytime. If not, you’ll have a utilization rate with high credit, which impacts your credit scores negatively.
They Often Demand Good Credit For Good Offers
The regular credit cards generally demand that you earn good credit to be entitled to great offers. The cards with valuable rewards require higher scores with credit history that is well established. For rewards credit cards you often need up to 670 score at least. On the other hand, Student credit cards are specifically designed to offer users with new credit to build their profile.
What To Know About Student Credit Cards
They Might Offer Limited Rewards
Some rewards cardholders can benefit from the student credit card include a range of rewards such as cash back on purchases over certain categories. As for the regular credit cards, you may be open to some more extravagant reward options, such as airline miles, signup bonuses, and access to travel benefits such as luxury airport lounges.
They Offer Students With Special Benefits
There is a likelihood of student credit cards providing high enticing perks to college students. For instance, Certain Discover student cards give rewards of $20 statement credit yearly to students who attain a GPA of 3.0 or more.
They Often Offer a Reduced Credit Limit
Since virtually all students are new to credit, card issuers need credibility to be built to sort big balances. In essence, a student card may attract a reduced credit limit compared to a regular card. You can always receive a higher credit limit as you pay timely on your card. This however depends on your card.
They are Generally Not Secured
While regular credit cards can be either secured or unsecured, student credit cards are often unsecure. This means you do not have to make a deposit into them.
Why Should A College Student Opt For A Credit Card?
You can become an account holder from 18. You find this move worth if you make your own earnings or consider a card company which gives room for cosigners (while a parent or some other dependable person in your life is willing to be of help). your cosigner must however be aware that debts that may become difficult for you to pay will put him or her on the hook.
You should also be sure that you have what it takes to be responsible for fulfilling the requirements of having a credit card. If you have doubts in this, you may want to consider a different credit-building option. And from there, apply for a regular credit card later.
There are also alternatives to a student credit card which you may want to consider if you are unable to qualify for a student credit card.
Here are alternatives to a student credit card:
Apply For A Secured Credit Card
Secured credit cards often offer low credit limits which can be of benefit if you don’t meet the student income requirement or cosigner. Generally the deposit falls around $200 and $2000. If you have shown ability to be responsible with your secured credit card, you will likely find issuers that would automatically qualify you for an unsecured card.
Turn An Authorized User
You can join the credit card of a parent, older sibling, or guardian as an authorized user if they have pristine financial history. If the primary cardholder gives consent, you can use their card, you will not be held responsible for payments made. The on-time payment history on the account can be beneficial to yours.
Get A Retail Credit Card
Credit cards issued by stores are not likely to give similar stringent requirements as the unsecured cards would. However they are accompanied with high interest rates which crucial that you settle off the balance every month to prevent interest charges from occurring. Also consider other credit card options before making this decision.
Student credit cards can be vital to building a good credit history, while also offering benefits that can be helpful as a college student. Once you are responsible with the credit card, acquiring a regular credit card will come easy.