Student credit cards offer many young people their first taste of financial freedom – but at the price of financial responsibility. Credit ratings can be established or destroyed during your educational years, and selecting college student credit cards which reward students for maintaining their student credit card account in good order may be the incentive they need to take their first upward step on the credit ladder.
What Are Student Credit Cards?
Student credit cards are simply “starter credit cards” for a generation of people yet to develop financial independence. Issued by the same banks that students may use during their entire life, student credit cards generally have lower credit limits, less generous reward programs and a more stringent payment process until such time as the student has shown that they are able to maintain their account to the bank´s satisfaction.
In many cases, student credit cards have to have a financial security placed on them – either by the student themselves or by a co-signer. “Credit” facilities are then offered by the issuing bank up to the amount of the security deposit. College students also have the option of using a prepaid student credit card, which operates in the same way as a bank debit card, but are the first steps to developing a credit history.
Student Credit Cards with Credit
Despite new Federal regulations limiting the availability of credit to college students under the age of 21, there is still a choice of student credit cards for students with no credit history that do not require a co-signer or proof of income. Typically, these student credit cards attract a high APR percentage until the account is seen to be operated responsibly, however may come with a rewards program, cashback and even bonuses for achieving a good GPA.
Most student credit cards are available without an annual fee, and many issuing companies also provide services such as text messages and email alerts to remind the student when payments are due. However, there are no student credit cards for bad credit applicants of this nature, and the best thing a student should do if they have already damaged their history is to start again with a prepaid student credit card.
Student Loans and Credit Cards
As students leave home and set off for a new life at college or university, one piece of advice they will often fail to hear is to protect their credit rating. Even though credit counselors exist to provide assistance if a student has over-extended themselves financially, it is often the task of the individual to acknowledge that they are experiencing difficulties.
There are five tell-tale signs that a student should look out for:
- Paying only the minimum payment each month and leaving a credit balance which accrues interest
- Delaying payments and being charged late payment fees, which also accrue additional interest if not paid immediately
- Exceeding a credit limit. This might only be by a few cents, but it will reflect badly on the student´s credit score
- Using funds from one credit card to pay the minimum payment on another is a sign that a student is not coping financially
- Raising the money to cover credit card payments by working more and studying less
The best advice for students and student credit cards is to start off with a free student credit card that has a minimal credit limit and no operating expenses, provided that any balance acquired throughout the month is paid on time. Banks will usually extend further credit on request once an account has been maintained in a responsible fashion for a period of time and, by starting small and developing a solid credit history, students will be able to enter the world of employment with an excellent credit rating to match their excellent grades.