Some facts about student credit card.
Are you contemplating about applying for a student credit card? You should understand that student credit cards are quite different from the regular cards. Just as the name implies, student credit cards are specifically designed to meet the needs of students who may not have credit history to qualify them for regular credit cards. And you know that without a credit history, there is no way one can have credit report. Among other things, the credit card companies will need to assess your credit worthiness through your credit report before your application for credit card can be considered.
If you are a student with no or limited credit history, student credit cards will be a starting point for you to start building your credit. That is not to say that student credit cards are that cheap for anyone to get. Before applying for a student credit card, you need to understand the following:
You must be a college or university student
In your application for student credit card, you will be asked to supply information about your school possibly with the email address of the school. The card company will like to verify the information you have provided in order to be sure that you are actually a student of the school. If you left the school just a week ago, you are no more a student of that school. Therefore, you may not qualify for student credit cards.
You must be at least 21 years old
It is not all students that qualify to be issued student credit cards. Before any application for student credit cards can be granted, the beneficiary is expected to be at least 21 years old. Not notwithstanding if you have a proof of income and you are up to 18 years old, there can be an exemption in this regard. Your income should be sufficient enough to pay any charge on your credit card.
You might require a co-signer
The problem with many students is that they don’t usually have sufficient credit history if they have at all. For this reason, the credit issuer may not be able to correct assess whether you will be able to able any balance on your student credit card. That is why credit card companies usually require that students provide co-signer who will be financially responsible for any unpaid balance on the card in case of default
You may be granted small limit
Student credit cards are issued with minimum credit limit. The amount you will be granted may not be as high as that of a regular credit cards. This is to ensure that you don’t spend beyond what you can afford to pay. Most students don’t have any source of income on their own. Therefore, the credit card companies do not expect students to use their student credit cards for purchase of assets.
You are expected to use your card responsibly
The fact that you now carry a student credit card does not mean that you are at liberty to use the card anyhow. You should not use it to purchase what you know you will not be able to pay in full at the end of the month. You should rather see the student credit card as a tool for building your credit. As a student, you may not know the importance of having a good credit for now. But by the time you finish your education, you will soon discover that the health of your credit report has a lot to do with your ability to access auto loan or even rent an apartment. Please, it is easier to build your credit than to repair it. Certain bad credit information may stay in your credit report for as long as seven years. This is a long time indeed. If you don’t want your credit report to hurt you, it is important they you pay your card balance in full at the end of each month. You can set payment alerts if you are the type that easily forgets. Some card companies usually sent payment alerts to their customers. If this is available with your card issuer, you can take advantage of this.
How to Choose Best Student Credit Card
No matter how difficult it may seem to you to get your first student credit card, you will always have options to choose from. Therefore, you should not rush into accepting any offer that comes your way. The secret of getting the best student credit card lies in making comparison. If you don’t compare cards, you will think that you have made the best choice or that there is no better student credit card elsewhere. So, if you want to compare student credit card offers, these are the features you may like to consider:
Most credit cards are not free. The cardholder may need to pay annual fee to the card company. But there are credit card companies that don’t charge annual fee on student credit cards. As a student, every dollar is significant to you. Therefore, selecting a student credit card that does not attract annual fee will be a good choice for you as a student. You can use this saving to buy other things that are more important to your education.
Before you accept any student credit card, you should ask about its annual percentage rate (APR). Annual percentage rate represents the interest rate you will pay on the card balance. Some credit card companies offer 0% introductory interest rate for initial period of up to six month. This means that you will not pay any interest on any balance you carry on your card within this period. This is a good offer, of course. However, it can also serve as a bait. The interest rate after the 0% introductory interest rate expires can be unbearable. This may even make it difficult for you to pay off the card balance thereby leaving you to be in debt for a long time. This will not also help your credit score. Another point you need to understand is that credit card companies usually advertise APR in range, say like between 13% to 23%. You can see that the gap is so wide. The truth is that you might not qualify for the lower rates. So, you need to find out the rate that is applicable to you as a person. Don’t base your decision on the general regular rates. Everyone will be assessed based on his own unique situation. That is why two students applying for student credit card may be offered the same type of card but with different APR.
Almost everybody likes rewards both the rich and the poor. At times, you will wonder why the rich use their credit cards to make purchase when they have enough money to pay immediately. Apart from the fact that they want to build their credit history, some of them actually like to enjoy the rewards that come with the use of such credit card. So, if the rich will like to enjoy rewards that comes with their cards, why shouldn’t you seek for student credit card that has the features of cash back. With cash back rewards, it means that the credit card company will pay you back certain portion of the amount you spend on purchase using your student credit card. Alternatively, this money can be credited to your card making it available for you to make certain purchases.
Protections and Warranty
Cases involving credit card frauds are becoming more rampant, As a first time card holder, you may not know the steps you need to take to protect you card. That is why you need to seek for student credit card that over protections. There are credit cards that offer protection against fraud. If you hold this kind of card, it means that you will not be help responsible for any purchase that is not authorised by you. In fact, I expect all student credit cards to have this feature. But you don’t assume. If there is any feature you want your student credit card to have and the card company seems to be silent about, it is your responsibility to ask for clarification. Another feature that can attract students to a credit card is the protection on purchases. It is not uncommon that somebody will buy something and later discover that the item is faulty which may warrant returns. You need to find out if you can claim refunds from your card company in case the company that sold the item to you is not forthcoming.
There are credit card companies that reward students for good grade if you secured your student credit card from them. If you have up to 3.0 in your GPA, you can enjoy a cashback of about $20 per annum. This can continue as long as five years if you are able to maintain the grade. In addition, if you search well, you can find credit card company that will offer you free FICO credit score on your monthly statement. If you are keen in knowing your credit status, I think this feature should attract you. It will help you know how you stand per time. If you need to take certain step to correct anything that can easily hurt your credit, you can do before the damage is done.
Terms and Condition
This point is very crucial as far as credit cards are concerned. It is not applicable to student credit cards only. Each type of credit card has terms and condition that will attach to the features of such card. If you don;t understand anything about credit card, I want you to understand this section very well. Credit card companies usually advertise the features that they know will appeal to people. Some of the features may end up to be a bait. The only way for you not to be a victim of any card propaganda is to ensure that you read and understand the terms and condition governing any card. If you don’t understand, it is better you clarify. For example, a credit card company may advertise 0% interest rate, Meanwhile the 0% interest rate is meant to be 0% introductory interest rate. This means that the interest free grace is for a limited period, At the expiration of the 0% introductory interest rate period, the interest rate may jump up higher than that of other credit card companies that don’t offer 0% introductory interest rate. Another example is the areas of rewards and cashback. Before you get carried away with the offer, it is better you read through the underlying terms and condition. If you read through, you should not be surprised that you don’t qualify for the rewards. For instance, they may say that you need to spend certain amount within a specific period of time before you can qualify for the rewards or cashback. That means, if you don’t have such amount to spend, you are automatically disqualified. Another thing is that, if you over-stretch your budget in order to earn the rewards or cashback, this may push you into debt which you don’t have financial capacity to pay. At the end of the 0% introductory interest rate, you will start paying huge amount of interest. To worsen it, you may be required to utilise the rewards on certain things that you may not actually need. On the other hand, the cashback may not actually come to you in form of cash. It will be credited to your student credit card. And they may compel you to use the cashback within a certain period. Failing to comply will make you forfeit the reward. So, credit card companies know what they are doing. If they give you something, you may be paying for it in another way if you don’t know how to play your game. Therefore, you don’t need to rush into accepting any student credit card. You need to ensure that the terms and condition attached to its features actually suit you.
In conclusion, I will say that it is actually a good idea to hold a student credit card. It will prepare you to learn how to manage credit card with the minimum credit limit you have at your disposal. By the time your credit limit increases, you must have learnt how to stay within your budget. I actually feel that every student should hold student credit card. You may not feel like having it now but it will help you in the future. You cannot build your credit overnight. You need credit history to build your credit score. And most of the financial transactions you will ever do will require that you have a credit history in order to ascertain your credit worthiness. If you want to access auto loan, every financial institution that you will approach will definitely like to know about your credit history. Beside, have a good credit score which you must have built over time will have you in getting loans at affordable rates. The earlier you get your student credit card, the better as this can even help you in building a good relationship with your credit card company. There is a saying that Rome is not built in a day. And it takes relationship to build a trust.
Another reason why holding a student credit card can be a good idea is that it provides accessibility to funds in case of emergency. While at school, you are likely miles away from you parents. But with your student credit card, you can easily and quickly sort things out on your own. This alone will give your parents peace of mind knowing that their child’s finance is properly taken care off. However, the summary is that, you should ensure that you use your student credit card responsibly. Don;t carry over balance on your student credit card to the next billing cycle. This is the only way to avoid payment of high interest rate. However, if it happens that you can’t pay up your balance in a particular period, you should ensure that you develop a payment plan on how you can quickly pay it off without missing a payment. Each credit card company will expect that you make minimum payment, at least, at the end of every month. It is important that you are aware of the minimum payment in order to be sure you will be able to meet up with the payment every month. Default in making the payment will definitely hurt your credit score. Finally, you should understand that your student credit card is different from debit card which you can use to make withdrawal at will. Even though, it is possible to use credit card to make withdrawal, the danger is that you will be compelled to pay fee on the withdrawal in addition to the interest. The interest on withdrawal is always higher than the normal interest rates you pay when you use the card for purchase. For this reason, it is better to stay away from using your student credit card from making cash withdrawal.