Navigating financial responsibility as a student can be challenging, with having to balance tuition, fees, textbooks and living expenses.
One tool that can help you manage your finances and build credit history is a student credit card. Here, we’ll explore how student credit cards work and some tips for responsible usage.
What is a student credit card?
A student credit card is designed specifically for college students new to credit. Unlike standard credit cards, these are tailored to meet the needs of new credit users with limited credit history. They typically come with lower credit limits and benefits personalized to students’ financial needs.
How student credit cards work
Before you apply for a student credit card, you should know some of their important features so you can see whether they’re a good fit.
Application requirements
To apply for a student credit card, you usually need to be at least 21 years old and have proof of your enrollment at an accredited institution, though some issuers may allow exceptions for applicants over 18 years old or applicants who don’t supply proof of enrollment. You’ll also need proof of steady income or financial support.
Credit limit
Student credit cards may have lower credit limits than regular credit cards. Card issuers set your limit based on your creditworthiness, which may be less robust for new credit users, and factors like income. Lower limits help manage risk for the issuer and encourage responsible spending.
Interest rates and fees
Like regular credit cards, student credit cards will charge interest when you don’t pay off a statement balance in full by the end of the billing period. How much interest is charged will depend on the student credit card’s purchase APR, and you should also be mindful of the different APRs a card may apply to cash advances, balance transfers and standard purchases.
There may be fees for late payments on your balance and foreign transactions. It’s essential to be aware of these fees to avoid unnecessary costs.
Advantages of student credit cards
For any college student interested in getting started with credit cards, student cards offer a few different advantages.
Building credit history
One of the most significant advantages of having a student credit card is the opportunity to build a credit history. Responsible use – such as paying bills on time and maintaining low balances – can positively impact your credit, which may benefit you when applying for loans or renting an apartment.
Financial education
Student credit cards often come with resources to help users understand credit management. These could include tools for budgeting and monitoring your spending or creditworthiness. These resources can be instrumental in developing sound financial habits.
Emergency use
While it could be better to tap into an emergency fund first if you need to pay for an urgent expense, a credit card can help you access additional funds in emergencies. Whether it’s an unexpected car repair or a temporary cash shortfall, having a credit card can provide a buffer and help you manage your finances more flexibly.
If you do use your credit card for emergencies, you should always make sure you can pay off as much of your balance as possible by your card’s due date to avoid incurring unnecessary interest.
Tips for using a student credit card responsibly
Here are some tips for using your student credit card responsibly:
- Create a budget: Establishing and sticking to a budget is fundamental. Track your income and expenses to ensure you spend within your means and avoid carrying a balance.
- Pay your bills on time: Timely payments are crucial for maintaining a good credit score and avoiding late fees. Set up reminders or automatic payments to ensure you never miss a due date.
- Monitor your credit: Regularly check your credit report and score to monitor your financial health. Many credit card issuers provide free access to credit scores, which can help you stay informed about your credit status.
- Understand the terms and conditions: Before using a credit card, thoroughly read the terms and conditions. Be aware of the interest rates, fees and rewards structure to make informed decisions and avoid surprises.
Alternatives to student credit cards
If you don’t qualify for a student card or are interested in similar financial products, try looking into these other options.
Secured credit cards
Secured credit cards require a cash deposit as collateral, which an issuer may also use to set the amount of your credit limit. Like student cards, they’re a good option for building credit with less risk to both you and the card issuer.
Debit cards
If you’re concerned about having immediate access to your funds, using a debit card can let you make transactions using the money in your checking account. You may also be able to access similar features offered by student cards, such as budgeting tools or mobile apps.
Disclosure: This article is for educational purposes. It is not intended to provide legal, investment, or financial advice and is not a substitute for professional advice. It does not indicate the availability of any Citi product or service. For advice about your specific circumstances, you should consult a qualified professional.
