In today’s circumstances when everything is available online, a credit card is more of a necessity than a luxury. If you are a student entering into a college for the first time, you should have a student credit card with you to manage your expenses. However, are you apprehensive of applying for a credit card? Perhaps, you might have heard various stories about students misusing credit cards and ruining their finances. We shall help you choose the best credit card for students.
Table of Contents
- The Concept of Student Credit Cards
- The Eligibility Criteria for Student Credit Cards
- Student Credit Cards: Who should use them?
- Student Credit Cards – Points to note when applying for one
- Student Credit Cards – Why should you use them?
- Final thoughts
The Concept of Student Credit Cards
In the past, credit card issuers used to set up marketing booths outside every university and entice students to apply for credit cards. They used to offer incentives to students enrolling for a student credit card. Now, the rules have become strict where credit card issuers cannot entice applicants in this manner.
The Eligibility Criteria for Student Credit Cards
The basic eligibility norm is that you should be a student. Today, student credit cards are available to students having a decent credit profile and satisfying basic income norms. Yes, the great news is that there is a relaxation in the rules whereby you do not need to have a long credit history or a high monthly income. The best credit cards for students are available to students having little or no credit history and a fundamental credit score.
Student Credit Cards: Who should use them?
- Student credit cards are ideal for students who do not have an established credit rating and earning miscellaneous income from a part-time job.
- Students who wish to build up a good credit history can make a beginning by using student credit cards.
Student Credit Cards – Points to note when applying for one
The credit cards for students come with various features. Here are some terms that you should know in this regard.
❖ Annual Percentage Rate (APR)
All credit cards come with an interest-free period. Usually, it is a maximum of about 50 to 52 days. However, it has some riders attached to it. The credit card issuers provide you with a bill for payment of the dues by a specific date known as ‘Due Date.’ If you pay the entire bill before the due date, you do not pay any interest on the amounts you incur. However, if you carry forward a part of the payment into the forthcoming month’s bill, the balance amounts attract interest at a specific rate known as APR. Usually, you should not carry forward payments to the next month. However, if you do so, you should opt for a credit card that offers the lowest APR.
❖ Introductory APR
Some credit card issuers offer an introductory APR (usually 0%) for an initial period of say 6 to 18 months wherein you do not pay any interest on the balances you carry forward during the offer period. Note that if you do not pay the entire bill during the introductory APR period, the bank will not charge interest. However, it will affect the credit limit on your card. Hence, it is better to repay the entire bill and develop financial discipline. It will help you later on in your career.
❖ Annual / Renewal Fee
Thecredit cards for students come free of cost initially. Nevertheless, you should check up the yearly/renewal fee before applying for the credit card. Look into these factors when you apply for a credit card.
❖ Cash Advance Fee
Most of the credit cards come with a cash advance facility. You can withdraw a specific proportion (say 15% to 20%) of your credit limit as a cash advance. This cash advance facility does not come free. You have to pay a cash advance fee along with interest on the cash advance amount @ APR for the number of days from the date of advance to the date of payment.
Credit cards come with additional benefits like cash back offers, discounts, and reward points. You can redeem these points at a later stage to purchase gift articles or even books. Some cards allow you to use the reward points towards paying the annual renewal fee. Check up with your credit card issuer whether such a facility is available on your card.
Student Credit Cards – Why should you use them?
Now, you know how to choose the best credit cards for students. Since it is the first time you will be using credit cards, you should understand why you should use credit cards and the precautions to maintain while using them.
- Students usually in the age group of 18 to 23 years apply for such student credit cards. Since you start early, you have an advantage because the age of your accounts is a crucial aspect that decides your credit score.
- As you repay the credit card dues on time, you build up a decent repayment history. It helps to improve your credit rating thereby proving advantageous when you apply for a regular credit card or other loans in the future.
- You can take advantage of various cashback offers, rebates, and other attractive gift offers when you use your student credit cards wisely.
- Usually, students start their career with the burden of repaying their education loans. Having a credit card and maintaining it can help you develop a decent credit rating.
Important Points for students
- Use your credit cards wisely. Do not fall into the temptation of purchasing things that you do not need.
- Pay your bills on time. If you carry forward your payments, you have to pay interest. It also affects your credit rating.
We have seen what student credit cards are and how you should go about choosing the best ones. Develop a robust financial discipline and build up a good credit history. It will help you later on in your career when you apply for loans.