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Top Credit Card Features Every College Student Should Look For

Navigating the world of credit cards and building credit responsibly as a college student may seem a little daunting at first. However, even a surface-level grasp of their basic features can make this journey much more manageable.

The key elements to consider when selecting any credit card include the Annual Percentage Rate (APR), the presence or absence of annual fees, and the availability of rewards and cash back programs.

But first, let’s make sure we understand just what we’re getting into.

Understanding Student Credit Cards

Student credit cards are specifically designed for college students with limited or no credit history. Their primary purpose is to provide a means for students to build credit while still in school. These cards often come with lower credit limits and higher interest rates due to the perceived risk of lending to individuals with no credit history. 

One of the major benefits of student credit cards is the opportunity they provide for young adults to start building a credit history. This can be beneficial in the long run when applying for loans, renting an apartment, or even getting a job.

However, to be eligible for a student credit card, you must be a student enrolled in a recognized college or university. Some card issuers may also require proof of income or a co-signer. It’s important to read the terms and conditions carefully before applying.

Evaluating Student Credit Card Features

When looking for a credit card as a student, a few factors matter more than others. You’ll want to consider the annual interest rate (APR), rewards or perks that come with the card, and building a solid credit history.

Additionally, credit unions also often provide extra help such as educational resources and personalized customer service for understanding and improving your credit. Let’s take a closer look at these traits:

  • Fees and Annual Percentage Rate (APR): The APR, a yearly calculation of borrowing costs, encapsulates both interest rates and fees. Beware of cards offering low introductory APRs, as they may surge post-introductory period. Fees can encompass annual charges, late payment penalties, and foreign transaction costs.

  • Rewards and Benefits: Student credit cards, particularly those from credit unions, often provide enticing rewards and benefits. For example, the Student Mastercard from USC Credit Union offers rewards on purchases, promoting responsible spending. It also provides ID theft protection, fraud monitoring, and alerts.

  • Credit Reporting and Building: Credit reporting is an essential aspect of student credit cards. Every transaction you make is reported to the credit bureaus, which helps build your credit history. A good credit score can open doors to better financial opportunities in the future. However, it’s crucial to use the card responsibly. Late payments or maxing out your credit limit can negatively impact your credit score. Therefore, it’s important to understand your credit limit, pay your bills on time, and keep your credit utilization low.

Alternatives to Student Credit Cards

Financial alternatives to student credit cards, such as secured credit cards, charge cards, and prepaid debit cards, each have their own unique advantages and potential pitfalls. Secured credit cards, for instance, offer a sense of security, backed by a deposit that acts as your credit limit. Charge cards, on the other hand, require full balance payment each month, promoting disciplined spending. Prepaid debit cards offer convenience, allowing you to spend only what you load onto the card, thus avoiding debt. Understanding these alternatives will empower you to make informed financial decisions:

  • Secured Credit Cards: Secured credit cards are a viable alternative to student credit cards, especially for those with no credit history. These cards require a refundable security deposit, which sets your credit limit. They function like traditional credit cards, allowing you to build credit over time. The deposit acts as a safety net for the issuer, reducing their risk. It’s important to ensure the card issuer reports to all three credit bureaus to effectively build your credit. While they may come with higher fees, secured cards can be a stepping stone to unsecured cards as you demonstrate responsible use.

  • Charge Cards: Charge cards don’t have a pre-set spending limit. Instead, purchases are approved based on factors like your financial resources and credit record. This can provide greater flexibility for students managing their finances. However, it’s important to note that charge cards require you to pay your balance in full each month. Failure to do so can result in hefty late fees and potential damage to your credit score. They’re best suited for students who are confident in their ability to manage their spending and pay their bills on time.

  • Prepaid Debit Cards: Unlike traditional cards, prepaid debit cards require you to load funds onto the card before use, effectively eliminating the risk of overspending and accruing debt. This feature makes them an excellent tool for students learning to manage their finances. However, they don’t offer the same opportunities for building credit history as regular credit cards do. Additionally, they often come with various fees, such as loading or transaction fees, which can add up over time. While prepaid debit cards can be a safer choice, they may not provide the same long-term benefits.

Responsible Use of Student Credit Cards

To avoid financial pitfalls, students will have to use their credit cards with discipline and awareness. Timely payment of bills and keeping the balance low will help you build credit, and avoiding debt is equally as important. Additionally, maximizing your rewards and benefits can also help you save overall.

Building Credit

Regular and wise use of your student card is key to building credit. Actively manage your finances, paying off your balance each month to avoid interest and show responsible debt management. Remember, building credit is a marathon, not a sprint, and with patience you’ll create a strong credit history for your future.

Avoiding Debt

Budget actively to align your spending with your income, ensuring you can clear your student credit card balance each month. This approach prevents debt and interest from piling up. Familiarize yourself with your card’s terms, particularly the grace period, to sidestep late fees. Remember, your student credit card serves as a credit-building tool, not a source of free money.

Maximizing Rewards and Benefits

Maximize your student credit card rewards by focusing on high-reward categories like groceries or gas. Secure sign-up bonuses by hitting spending thresholds within set timeframes. Evade interest charges by clearing your balance monthly and stay vigilant for rewards program changes to optimize benefits.

The Bottom Line

At the end of the day, student credit cards can be a powerful tool for building credit history and learning financial responsibility. However, they must be used wisely to avoid debt and get the most out of your rewards. Alternatives like secured credit cards, charge cards, and prepaid debit cards can serve many of the same purposes as student cards, when used correctly. Ultimately, the choice depends on your individual financial needs and budgeting discipline.