As you begin your academic journey, it is important to pay close attention to your finances. Managing your money effectively can make a significant difference in your college experience. A recent study conducted among college students found that most of them, specifically 66%, believe that inflation has negatively affected their financial well-being.
This means that as a student, you need to be extra cautious and mindful of your expenses. Besides creating a budget, getting a student credit card can be a valuable tool for building credit, handling unexpected expenses, and even earning rewards.
With so many options available, it can be hard to determine which credit card is the best fit for you. Here are some key factors to consider when selecting your first card.
In This Article
Eligibility
Before applying for a student credit card, determine whether you meet the eligibility requirements set by the card issuer.
The minimum age requirement to apply for a credit card is 18 years old, but the Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009 requires an extra requirement for applicants under 21 years old, which is to show proof of independent income.
If you are under 21 and don’t have independent income, you can still access credit by becoming an authorized user on someone else’s credit card, such as a parent or older sibling.
Interest rates
When you’re a student, finding a credit card with a low or zero percent annual percentage rate (APR) is vital to avoid paying high interest rates.
A 0% APR credit card will allow you to make purchases without accruing interest, helping you save money in the long run.
However, it is important to note that these introductory rates usually expire after a certain period, so be sure to pay off your balance before the promotional period ends to avoid incurring high-interest charges.
Rewards programs
Many credit cards offer rewards programs that can be very beneficial for students. Look for cards that offer cashback rewards, travel rewards or points that can be redeemed for merchandise or gift cards.
Some programs may have a cap on rewards, expiration dates, or require a minimum number of points before you can redeem them. Additionally, some rewards programs may have an annual fee, which can offset the benefits if you do not use the card frequently enough.
Before applying for a credit card with a rewards program, consider your spending habits and choose a program that offers rewards that you will use.
For example, if you frequently travel, a travel rewards program might be a better fit for you than a cashback rewards program. Similarly, if you spend a lot of money on gas and groceries, you might want to look for a card that offers bonus rewards for those purchases.
Credit limits
As a student, you may not have a high income or vast credit history. Therefore, selecting a credit card with a suitable credit limit is crucial. Opting for a credit card with a high limit that you can’t afford to pay back can lead to missed payments, additional fees, and penalties.
By selecting a sensible credit limit, you can make timely payments, improve your credit score, and avoid any unnecessary financial burden.
Fees
Credit card companies may charge you additional fees, such as late fees, foreign transaction fees (usually 1% to 3% of the transaction), or other penalty fees.
Some issuers may waive the late fee for the first missed payment, while others may charge you immediately. It is essential to understand not just the fee amount but also the rules surrounding it.
What are the advantages of having a student credit card?
Student credit cards can help you learn how to manage finances, budget expenses, and track spending habits. Here are some benefits of getting a student credit card.
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- Building credit: Responsible credit card use can help build a positive credit history, which is essential for future financial endeavors such as getting a car loan or mortgage.
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- Convenience: Credit cards are a convenient way to make purchases, especially online, where cash is not accepted.
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- Emergency funds: In case of unexpected expenses, like car repairs or medical bills, credit cards can serve as an emergency fund.
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- Financial education: Student credit cards can be a great tool for learning how to manage money and credit responsibly.
Should you apply for a student credit card?
Student credit cards can be a valuable financial tool for building credit, earning rewards, and learning financial responsibility. However, before you apply for a credit card, it’s important to research and compare different options to find the best fit for your needs.
Consider factors such as interest rates, fees, rewards programs, and credit limits. And remember to use your credit card responsibly by paying on time and keeping your balance low to avoid damaging your credit score.
By doing your due diligence and practicing good financial habits, a student credit card can greatly benefit your financial journey.
Written by Rose Wheeler
Rose Wheeler oversees the blog’s writing team and creates content strategy for Prosper. With 15+ years of journalism experience, she has covered business and finance-related topics such as consumer finance, financial products, banking, credit, and money management. Previously, Rose served as Editor-in-Chief for Wealth Hub at Future, Deputy Editor at Forbes Advisor, and Content Editor/Strategist at Millennial Money and The Motley Fool. In her free time, she enjoys exploring new places, reading, and playing video games.