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Everything You Need To Know About Student Credit Cards

February 21, 2020

College student sitting in a coffee shop using her credit card

Applying to college is a major decision, so is getting your first credit card. If you’re a college student, then getting a credit card may already be on your mind. College students may be especially interested in becoming a cardholder because credit cards are adapting further into the digital age, with options such as phone payments and contactless payments. But, before any student takes on the role of a cardholder, they must first understand the credit card basics. 

These pieces of plastic may not be as intricate and bewildering as some may expect, but there is still a lot to learn. Whether you’re an existing cardholder, about to apply, or just curious about credit cards, the following information will benefit you immensely! This quick guide to student credit cards will teach you everything you need to know before you get started.

 

What is a student credit card?

A student credit card is a credit card that is issued to a person who is attending college or planning to attend college. The card is designed to help those who may not have a credit history to begin building credit and smart financial habits. A student credit card offers a low initial credit limit, so college students can learn how credit cards work without the ability to overextend their budget. It is often the first credit card an individual has. 

Student cards make it easy for students to build their credit, offering reasons to make purchases and pay them off on time. Students who apply for a student credit card must have some proof of income or a co-signer to receive a credit card. 

 

How do credit cards work?

A credit card allows a cardholder to borrow money from their bank to make purchases. As long as the cardholder pays the money back within the grace period of 25 to 30 days, they don’t have to pay extra. If the cardholder doesn’t pay it back in that amount of time, they’ll have to pay interest. Interest is a percentage of the money the cardholder owes the bank that gets added on top of what they borrowed. 

 

Why should I get a student credit card?

This is why you should get a credit card! Build credit, Flexibility, Security, and Financial Independence.

Build credit

The earlier that a college student begins building credit, the better! Credit scores range from a low 300 to a high 850. It’s crucial to begin establishing a good payment history sooner rather than later. By working towards a good credit score now, you can work towards credit limit increases. This means you will be able to borrow more money with a lower interest in the future. High credit limits can be especially helpful when it comes time to take out an auto loan to purchase your first car or rent your own apartment. See Quiz: Can we guess your credit score?

Flexibility 

Although it is ideal all authorized users make their monthly payments on time and in full, credit cards offer some forgiveness when this is not the case. Credit cards allow their cardholders to pay things back over time. This is especially beneficial when someone has an unexpected financial emergency or needs to make a significant purchase.

Security 

Student cards offer college students a good sense of security. College life is difficult, and you might not always have cash on hand to handle any unexpected emergency situations. A student credit card can help resolve this issue by offering a secure and easy way to pay. 

Financial Independence

Another great perk of having a student credit card in college is financial independence. College students who start these money habits young will be better prepared for life after college. Student credit cards are also a great way for students to stop asking their parents for money but offers ways for parents to help pay off their card if need be.

 

What can I use a student credit card for?

Student credit cards can be used for just about anything, as long as the purchase price is within your credit limit. While this is exciting and enticing, student cardholders should always be aware of how much they’re spending. Here are some 1st Financial Bank USA reviews from student cardholders on how they use their card!

1st Financial Bank USA reviews

What are the costs of having a student credit card?

Interest payments

An interest payment represents the rate a cardholder is charged for borrowing money. The interest rate on an account determines these payments.

Annual Fees

An annual fee is an amount of money a cardholder is required to pay every year to maintain their cardholder status and keep enjoying the card’s benefits and rewards.

Late payment fees

Also known as a late charge, a late payment fee is an amount of money charged to a cardholder who has missed paying their minimum payment by the deadline. The fee amounts vary by issuer, but cannot exceed the minimum payment amount.

Balance transfer fees

A balance transfer fee is an amount charged to the cardholder when they transfer credit card debt from one card to another. The fee amount is usually around 3%-5% of the total transfer amount and is charged by the credit card company that you transfer the debt to.

Foreign Transaction fees

Sometimes referred to as an FX fee, a foreign transaction fee is a surcharge on a cardholder’s bill when a purchase that travels through a foreign bank or is a currency other than the U.S. dollar is made.

 

College student paying for coffee with her student credit card

What are some tips for using student credit cards?

Know your credit card.

As a cardholder, it is important you are familiar with your credit card and what it offers you. It is also a good idea to be able to understand and identify credit card terminology as well. 

Pay off your balance every month. 

By making sure that you pay off your balance on time and in full every month, you can avoid interest and late fees. Making regular monthly payments will grow your credit score as well!

Treat your credit card like a debit card.

Treating your credit card like a debit or prepaid card can eliminate the potential issue of overspending. This is important advice for new cardholders because it is easy to spend money they don’t have.

Focus on needs, not wants.

It is also important that you use your credit card for needs, not wants. Although items can be tempting, necessities should always be a top priority. 

Stay under 30% of your credit limit. 

This is a good rule to follow for new credit card users. By staying under 30% of your credit limit it will be easier to pay off on time and in full every month, and will also keep you out of the habit of spending money that you don’t have! 

Monitor your account on a regular basis.

Keeping up with your account by tracking your payments and monitoring all activity will help ensure that you are the only one using your credit card. It’s important that you verify all purchases made on your card are by you. Monitoring your account also helps you make sure you’re following the 30% rule. 

 

Student credit cards can be a game-changer for students in college. Not only do they offer a great sense of financial independence, but they also offer students a security net for emergencies, last-minute fixes, and unexpected issues. Remember to use your student credit card responsibly

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