Going to college is a significant life decision, so is applying for a credit card. Have you considered getting a credit card for college? There are many beneficial reasons to do so. You can use your student card at gas stations, restaurants, and more to start building your credit.
1. Learn good credit habits
One of the primary reasons to get a credit card in college is to begin learning good credit habits. Credit cards can be a great start for students to learn how to manage their money and a monthly budget while away from home for the first time. Having a credit card can be challenging, and there can be consequences for not following due dates.
Fortunately, a bonus to student credit cards is they often initially start with low, manageable credit limits. This allows college students who are new to credit the ability to learn how to use the card and make payments on a small scale. This can help prevent overspending or splurging on wants. As you gain experience and make regular monthly payments on time, a higher credit limit may be offered. Paying your balance in full each month will also mean you won’t have to pay interest.
“It is helping me build a good credit while also improving my personal responsibilities and how to deal with them. I am so glad I applied for this credit card and decided to begin my life knowing I’m starting it off right with the right people.” - Bryonna, MO
2. Gain everyday convenience
Being a college student, you may not always have the necessary funds to purchase your day to day items. If you need to buy something but you are between paychecks, a credit card can offer a sense of relief. Your card can be used on anything from groceries to gas to school supplies.
“Using my credit card was very helpful to me this month when buying books for this semester of college. I am also happy that being this is my first credit card, it will help build my credit.” - Frank, NY
“Helped pay for gas, food, and things I needed from the store. Really helpful when I was short on cash.” - Erik, TX
3. Have a sense of security
As most know, carrying large amounts of cash isn’t safe. There’s risk of the money being lost or stolen, often with little chance of full recovery. Cash is typically better off left in your bank account. Carrying a credit card, on the other hand, allows your money to remain safe, secure, and protected.
If your credit card is stolen, you won’t be held liable for any purchases you didn’t make. It’s important to always monitor your credit card statements for any suspicious activity. This can typically be done by accessing your account via the website or mobile app of your credit card issuer. If you detect any unauthorized activity on your credit card, report it to customer service immediately. A new credit card will be provided to you if the card was lost or stolen, and the account was compromised.
4. Have help with emergencies
An important benefit of having a credit card in college is that you’ll have money available if or when an emergency arises. This can bring comfort to parents knowing that if something were to happen, their child would have access to funds in their time of need. Whether you need money for emergency health care, car repairs, or a trip, your credit card can be a lifesaver.
“With being off from work these past couple months due to COVID-19, my 1st Financial Bank USA credit card really helped when I needed funding for essential living expenses. I was so thankful to have this card to fall back on. Truly a lifesaver during all of this!” - Dakota, OH
“Yes, very helpful! I was able to get home in an emergency because I could get gas with my credit card.” - RJ, TX
5. Build credit and establish a credit history
As a student in college, having a credit card is a great way to start building your credit score. Having a high credit score and a long credit history is appealing to lenders. Maintaining your monthly payment and using your card responsibly are key ways to start. Be sure to avoid making late payments and aim to pay more than the minimum payment each month. This shows that you’re reliable and responsible.
A major perk for getting a credit card in college is the potential to graduate with 4 years of positive credit history. Having that head start is incredibly beneficial when you’re ready to rent an apartment, buy a new home, or make any other significant life purchase. Using your student credit card to build credit and maintain a good payment history can pay off tremendously in the long run.
“Helped me build credit at the age of 19. It’s good to start young and learn responsible spending habits!” - Anonymous
6. Earn cardholder perks
Credit cards often come with promotional perks for cardholders. Along with the opportunity to earn cash back in select categories or account credit for qualified purchases, there may be other benefits as well. One common benefit is 0% APR for the first year, which is helpful for students learning to build responsible spending habits for the first time.
In addition to credit card benefits, some credit cards offer programs that are especially appealing to college students, such as scholarship offerings or the ability to donate to favorite charities.
7. Receive more favorable auto loan rates
Having built experience using a credit card while in college can even be beneficial when it comes to purchasing a car. Auto loan lenders like to see that you’ve been able to use credit responsibly and make payments on time. Without a credit card or other form of loan account on your credit report, you may be approved for a higher interest rate than someone with more credit experience. You could also be required to have a parent or someone with higher credit cosign on the loan.
In the worst case scenario, you may be denied for an auto loan all together. While having a credit card won’t guarantee you’ll be able to purchase a car with the most favorable auto loan rates available, responsible card usage will certainly put you on the right track.
8. Get lower car insurance rates
Having a credit card and managing the account responsibly could help you to get better car insurance rates. Think of this in the sense of how your credit score affects your interest rate on a loan. The better that your credit-based insurance scores, the lower your car insurance rate. Along with a good driving history, continuing to build good credit can help to lower your rates.
Keep in mind that each insurance company will have a unique formula when determining what your car insurance rate will be. However, many might view your credit report for information like your payment history, total debt, and length of credit history.
9. Get better student loan rates
Similar to auto insurance rates, using your student credit card to gain experience with credit could help you qualify for better private student loan rates or student loan refinancing rates.
The interest rate that is given to you is primarily based on your credit history. So, the higher the credit score, the lower the rate, and vice versa. Applying for a credit card and using your account responsibly can help raise your score and get you a lower student loan rate later on.
“School costs, money, and having this card allow me to build credit in order to pay for loans to pursue my dreams!” - Autum, SC
“It’s helping me get credit so I can hopefully get a loan for school with lower interest rates!” - Anonymous
10. Strengthen your rental appeal
While it may not be for a couple of years, you will eventually move out of your college dorm, sorority house, fraternity house, or parent's house. There’s a good chance you will then be looking for an apartment to rent as you finish college or begin your career.
Not all landlords will check your credit score, but there are plenty that will. This is because they want to make sure that you are capable of paying your monthly rent. Having a short credit history or poor credit score could mean that you’ll be required to have a cosigner on your lease. Another possibility is that you could be denied as an applicant all together. Applying for a credit card when you head off to college can allow you time to build your credit score before renting an apartment.
Overall, there are many benefits to getting a credit card in college. However, it takes an excellent cardholder to reap the full benefits of having a credit card. Make sure to continue to budget and manage your money each month to avoid late payments, interest rates, and avoidable fees.
Are you a student seeking to build credit with a credit card?