What are student credit cards and how do they work?

by Brad Fein
Credit Cards

Student credit cards are a popular option for college and university students looking to start building their credit histories. These credit cards are specifically designed with lower credit limits, fewer rewards, and special features to help students build their credit history. 

A 2021 study by CollegeFinance showed that about 15 percent of college students had maxed out a credit card. While student credit cards offer several benefits, they also come with potential drawbacks that students should be aware of before applying. This article aims to explain what student credit cards are and whether they may be right for you.

What is a student credit card?

A student credit card is a credit card designed specifically for students to borrow small amounts of money and build up their credit histories. These cards typically have lower credit limits compared to other credit cards but are intended to help students establish credit and practice responsible credit habits.

What are the benefits of having a student credit card?

One of the main reasons to get a student credit card is that it can help you build a credit history. If you use your card responsibly and make your payments on time, this can help you establish a good credit score.

When you want to apply for loans or credit in the future, including your mortgage, this good credit history will come in handy and help you get the best interest rates. On top of that, some student credit cards offer rewards such as cashback or points, which can be redeemed at shops, or for travel.

How do I apply for a student credit card?

You need to be enrolled in a college or university and be at least 18 years old. You can usually apply online or by visiting a local bank or credit union. They will ask you to give them some personal information including your Social Security number and address, as well as some information about your income and spending.

What are the potential drawbacks of using a student credit card?

One potential drawback of using a student credit card is that you could end up with a lot of debt if you are not responsible for your repayments. Although it can be easy to make repayments simply by setting up a standing order, many students forget to do this and end up in debt. You should also only use your card for purchases you can afford to pay off in full each month. 

How much credit can I expect to receive with a student credit card?

This depends on the card and the issuer but student credit cards usually have lower credit limits compared to other credit cards. However, some issuers may increase your credit limit over time if you use your card responsibly.

Can I get a student credit card with no credit history?

Yes! Most people who apply for student credit cards have no credit history. However, you may need to provide proof of income or have a co-signer on the account such as one of your parents. Some issuers also offer secured credit cards for students, which require a security deposit that serves as collateral for the credit limit.

What should I look for when choosing a student credit card?

Read the terms and conditions carefully to understand any fees or penalties associated with the card. Try to look for a card with a low-interest rate and no annual fees. This will make repayments easier. You may also want to consider the rewards program and the credit limit. 

Can I use a student credit card for anything?

Yes, more or less. You can use your student credit card for anything below the value of your credit card limit. It can be used for most purchases, including online purchases, in-store purchases, and bill payments. 

What happens if I miss a payment on my student credit card?

If you miss a payment on your student credit card, you may be charged a late fee and your interest rate may increase. Late payments can have a negative impact on your credit score, making it more difficult to obtain credit in the future. Try to avoid them by setting up a standing order or making sure you have set reminders each month.

Students are canceling the credit card

Can I cancel my student credit card?

Yes, you can cancel your student credit card at any time. However, it’s important to pay off your balance in full before canceling your card or it will have a negative impact on your credit score.

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