Student Credit Cards
Student credit cards are often easier to be approved for than prime “Rewards” cards.
Credit cards marketed to college students usually have higher interest rates and fewer benefits. Student cards also often restrict the amount of credit available.
College student credit cards are a way for banks to get in front of consumers who are expected to do well in their careers with stable incomes. Most college students become loyal customers and stay with their bank over many years.
For these reasons, financial institutions are willing to take risks to offer student borrowers these credit cards and make them readily available.
How Student Credit Accounts Can Help You
One of the most important things you can do while you’re in college is establish credit. Background checks for new employees are common and employers will review your credit history to determine how responsible you are.
Good credit also lets you qualify for auto loans. This is important because a reliable car ensures that you can get to school and to work. When your credit report shows you have paid your accounts on time, it proves your ability to manage debt.
Landlords and employers look for financial responsibility too. A clean credit report puts them at ease. It helps you move forward toward your goals.
5 Advantages of a College Student Credit Card
Student credit cards can help you get started in the right direction with a good credit history. They allow you to purchase everything that can be charged with regular credit cards and they report your on-time payments to the credit bureaus. These are genuine Visa, MasterCard and Discover credit cards. There are 5 main benefits to having a student credit card while in college:
You’ll appreciate having a student credit card when you need textbooks, groceries and any of the other things that keep your life going while you’re in college. When you have to run to the bookstore for study guides or you must get your car fixed, you often don’t have cash in hand. Credit cards let you make these purchases.
- That Important First Job and Apartment Lease
Most employers order a credit report for job candidates. With 2 – 3 student credit cards you may use just for gas and groceries while attending college, you are able to make sure that a potential employer sees your good credit. Use a college student credit card to position yourself for success early in your career.
- Credit Used to Calculate Scores
Credit scoring systems such as FICO and VantageScore are related to the length of time a consumer has utilized credit. Installment loans such as auto financing, personal loans and student loans are categorized differently than “revolving” credit lines such as credit cards. These are a strong indicator of a consumer’s credit risk so it’s important to optimize this factor for its impact on scoring your credit profile.
- No Deposits or Annual Fees
Most college student cards are unsecured so there is no deposit required to collateralize the account. Student cards help the cash-strapped college student utilize their money for more important things, like books, auto repairs, food and rent.
Many college credit cards don’t charge annual fees either. You can see several of Forbes.com’s recommended student credit cards here.
- Low Credit Limits
One of the features of credit card accounts intended for college students is their relatively lower credit limits compared with other cards. You are probably wondering why a student card with a low credit limit could be beneficial?
Do you want to use your PayPal or bank accounts for all purchases online? Identity theft and credit fraud has skyrocketed in recent years, so using a high credit limit bank card online is not a good practice.
Consumers are often shocked to discover that their bank accounts have been wiped out when someone got a hold of their account information. Using a card with a low credit limit of $200 – $500 limits your potential losses. Student cards are a form of self-protection on the Web.
Qualifying For Student Credit Cards
The recent recession made it a little more difficult to be approved for most types of credit accounts.
Qualifying for college student cards without an established credit history is not difficult. Sometimes you must verify your student status enrolled at least part-time in an accredited college program.
You also may be required to prove some income that demonstrates you have the ability to repay the amounts borrowed on the card. This can involve paycheck stubs, income tax returns, and letters from employers verifying your employment with them. Some student card issuers may accept co-signers willing to be responsible in case you cannot make payments on the account. Look into this other great card for students here.
How To Apply For a Student Card
If you are under 21 years old, the Credit Card Act of 2009 requires you to either:
- Show that your income meets requirements to qualify for a new account.
- Have a qualifying co-signer (who is over 21) who will be responsible for the card in case of default.
Proving that your income is sufficient to qualify is not complex. It normally involves providing recent pay stubs and W-2 wage statements.
Try to limit the frequency of consumer credit inquiries on your credit report, as these tend to lower your scores. It’s better to use careful planning, as described here, than to submit applications for credit cards that you probably wouldn’t be approved for.
If you are not approved for a student credit card immediately, there are other options available to you for establishing new credit. These include secured credit cards, gas cards, and retail store charge cards.
With good payments reported for these, you can then re-apply for a student card after 6 – 12 months. This strategy works well for student borrowers who may have a damaged credit record and who are under 21 years old without a co-signer available.
You must start building credit and credit cards for college students are a great way to start managing finances. Having a good credit record makes it easier to be approved for other financing later. Establishing a student credit card account that saves money just makes good economic sense.