Whether you’re an undergraduate, graduate or non-traditional student, utilizing a credit card that meets your needs is a great way to handle your money while juggling a student workload. Establishing a positive credit history early can also have a significant impact on many major life steps—like applying for your first apartment, purchasing your first car or getting a mortgage. Here’s what you need to know about student credit cards and how to best leverage them to your advantage.
What is a student credit card?
A student credit card works pretty much the way any credit card works, but with rewards and features specifically geared toward a student’s needs. Student credit cards are typically much easier to be approved for, as most students applying for their first credit card will often have limited or no credit history. These cards will also have a rewards structure that awards student-centric purchases like streaming subscriptions, dining or Amazon purchases.
Pros and cons of student credit cards
As is the case with any credit card, student credit cards have noteworthy perks and drawbacks. Here are a few pros and cons to keep in mind when evaluating student credit cards.
Pros of student credit cards
- Relaxed credit requirements. With student credit cards, even students with no credit scores may be approved. Some student cards take a more lenient stance on late payments by not charging a late fee on your first miss, although missing a credit card payment will have a negative impact on your credit score, no matter what.
- Student-centric rewards and benefits. A variety of student cards give cash back on popular student spending categories like dining, entertainment and gas. Some cards offer added benefits like purchase protection or credit-building tools to help credit beginners.
- Affordability. Plenty of student credit cards don’t charge annual fees, making them relatively affordable to hold. Many student cards also benefit study-abroad hopefuls and waive foreign transaction fees, but you should always check the card’s terms and conditions.
Cons of student credit cards
- Higher interest rates. Card issuers usually view students as high-risk borrowers, which often results in higher interest rates on student credit cards. As long as you make on-time payments on your credit card each month and pay off your balances in full, you should be able to avoid the added interest that comes with these higher rates completely.
- Lower credit limits. Issuers will usually grant lower credit limits with student credit cards, until the cardholder is able to demonstrate their creditworthiness with consistent, on-time payment history.
- Easy to outgrow. While great for your time as a student, a student credit card can easily become a bit restrictive as you build up your credit history and become eligible for cards with better rewards and perks. Luckily, a lot of issuers provide card options that are easy to upgrade to once you’re no longer a student.
Should I get a student credit card?
Having a basic knowledge of how credit cards work and how your credit habits can affect your credit score is paramount before applying for a student credit card (or any credit card). Student credit cards are best suited for undergraduate, graduate or non-traditional students who are looking to build a credit history from the ground up and want rewards for student-focused spending. If you are not a student but still hoping to build or rebuild your credit, you may look into applying for a secured credit card or another card option that best fits your current credit score tier.
When determining if you should get a student credit card, there are a few factors to consider. Before applying for a student card, look up all the terms and conditions, all associated fees, the card’s ongoing interest rate and whether or not it offers rewards. Assess your own spending habits to help figure out how much effort you’re willing to put into managing your account. Also, determine if you want to maximize your reward earnings or hunker down and focus on credit building. It’s important to craft a plan for always paying your credit card bill on time and in full.
Applying for a student credit card
Once you’ve evaluated your financial situation and decided a student card is the right choice for you, it’s time to apply. Here are five steps to applying for a student credit card.
- Understand your credit score. Your credit score is the key to knowing what cards you could be approved for. If you don’t yet have a credit score, there are still card options available.
- Go to the card’s issuer site and find the application. Once you’ve found the card that works best for you, set up any necessary accounts and locate the application for your card of choice.
- Apply for the card. Gather and input all necessary application information, such as your name, address and annual income. If you’re wondering what to put for your annual income, consider things like pay from your part-time job, scholarships, grants and regular allowance money.
- Look out for an application decision. An application decision could be instant or it could take a few days. If you are denied, an issuer is legally required to send a letter detailing the reason.
- Make a payment plan. If approved, note the card’s payment due date to ensure you always pay on time and in full to avoid added interest charges. You will then receive the physical card in the mail.
3 ways to use your student credit card
So, you’ve acquired your student credit card and you’re ready to put it to work. These are the three best ways to use your new card:
- Building credit. A student credit card is one of the easiest ways to start establishing a credit score. When used responsibly, the good credit score you build with a student card could lead to better loan choices with lower interest rates.
- Earning rewards. Student credit cards offer decent rewards like cash back. As long as you stay on top of your spending and make sure to pay your bill on time and in full, student cards are a great way to earn rewards on purchases students make the most.
- Emergencies. Life happens, and when it does, a student credit card can be a welcome safety net you can use to cover unexpected costs from things like a trip to the mechanic or the ER.
Whatever way you decide to use your new card, continue to prioritize paying off the balance each billing cycle. If you can’t pay the card in full, then make sure to pay the minimum required on or before the payment due date, to avoid late fees or major hits to your credit score.
Student credit card alternatives
A student card may not be the right fit for everyone. Here are a few alternatives to a student credit card.
- A starter card. If the student cards aren’t making the cut, there are other starter cards on the market for people who have no credit history.
- A secured credit card. Secured credit cards are also geared toward people with no, limited or low credit. The primary caveat to note with a secured card is that a security deposit is required and rewards may not be as lucrative.
- Become an authorized user. If you’re not ready for the full responsibility of having your own credit card, or you’re not old enough to access a student credit card, you could always consider becoming an authorized user on a parent or guardian’s credit account.
The bottom line
A student credit card can be a great way to start building your credit early so you’ll have an easier time accomplishing life’s biggest milestones. Paying your credit card bill on time and in full should always be your first priority. Do your research and pick a card that best fits your unique financial needs.