What is a Student Credit Card?

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As a student, having a credit card can be a great way to start building your credit history and learning how to manage your finances. However, with so many credit card issuers and options available, it can be overwhelming to know where to start.

One option to consider is student credit cards. These credit cards are specific to college students with little or no credit history. Student credit cards are similar to standard credit cards in that they allow you to borrow money and pay for your purchases on a monthly schedule. However, student credit cards offer rewards geared toward the lifestyles and expenses of college students and have easier eligibility requirements for full-time students to meet.

Choosing the right student credit card can benefit you by helping you build good credit. The Consumer Financial Protection Bureau estimated that 11% of the U.S. adult population is credit invisible or has no visible credit history. With a higher credit score, it'll be easier for you to get approved for an apartment, take out your first car loan, and even get hired for jobs once you graduate.

In this blog post from Bold.org, we'll discuss what a student credit card is, the benefits of opening a student credit card, and how to use a student credit card responsibly while you're still in school.

Don't forget to check out other blog posts on our scholarship blog to learn more about personal finance for students, including information about creating a budget for college and how long student loans stay on your credit. Also, create a free Bold.org profile today to access hundreds of scholarships to help you save money as a college student.

Having a higher credit score can help you qualify for lower interest rates.

Benefits of a Student Credit Card

  1. Eligibility Requirements

The primary difference between student and traditional credit cards is the eligibility requirements. Student credit cards are intended for those still in college, so limits around credit history and income requirements are easier for applicants to meet. As a result, student credit cards are a great option for a first-time credit card.

To qualify for a student credit card, you must be a U.S. citizen or permanent resident and eighteen or older. Most standard credit card issuers require people over 21 to open a traditional credit card.

If you are under 21, you can report the amount of another person's income that is regularly deposited into your personal bank account as part of your income. So, if you're still in college and receive a monthly living stipend through a scholarship or allowance money from your parents, these can be reported as part of your income for a student credit card.

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If you're currently over 21 years of age, you can still include another person's income available to you when applying for a student credit card.

Finally, to qualify for a student credit card, applicants must provide proof of enrollment at a two-year or four-year college or university. A current and unexpired student ID card is the best option.  However, you can submit a transcript or invoice from your college or university to prove your student status.

You must be eighteen years of age and currently enrolled in college to open a student card.
  1. Build Credit History

Using a student credit card responsibly and making regular, on-time payments can help you build a strong credit score. Credit scores range from 300 to 850 and are determined based on the following formula:

  • Payment History: 35% of your FICO score is determined by your payment history, meaning that if you make credit card payments on time, your credit score will go up.
  • Amount of Debt: 30% of your FICO score is determined by your amount of debt. The lower the amount of debt you have amassed, the higher your credit score will be.
  • Length of Credit History: 15% of your credit score is determined by your length of credit history. Using credit cards for longer periods and consistently making on-time payments will help you score high in this category.
  • Credit Mix: 10% of your credit score is made up of your credit mix, which refers to the different types of credit that make up your loan accounts. For example, student credit cards, student loans, mortgages, and car loans can be part of your credit mix.
    As a first-time credit card holder, you likely won't be holding multiple types of credit. Your credit mix score will increase as you get older and take on more loan accounts.
  • New Credit: Finally, new credit contributes to 10% of your FICO score. New credit refers to the number of recently opened credit accounts.

A good credit score is considered a FICO score of 670 or higher. People with higher credit scores have a higher chance of being approved for loans, mortgages, and credit cards and are offered lower interest rates.

As a result, if you open a student credit card and consistently make on-time payments, you will have an easier time taking out a car loan or a mortgage in the future. Opening a credit card and using your credit card responsibly is ultimately an investment in your future self.

Thirty-five percent of your credit score is dep
  1. Unsecured

Student credit cards are unsecured, meaning you don't need to provide a security deposit or collateral to open one.

To open a secured credit card, you must put down a minimal deposit, which translates to your credit limit. Unlike secured credit cards, student cards allow you to open a credit card without being limited by deposit requirements.

Rewards for Students

Student credit cards tend to offer perks for students that can help you save money on daily purchases.

For example, the Discover Student Cash Back Card allows students to earn 5% cash back on Amazon orders, groceries, gas stations, and restaurant meals. Another popular student credit card, the Capital One SavorOne Student Cash Rewards Credit Card, gives you 3% cash back on dining, entertainment, streaming services, and groceries.

By opening a student credit card and taking advantage of these benefits, you can save money on everyday expenses while building your credit score. Select a credit card that rewards you for your typical spending habits to get the best deals.

  1. Fallback for Emergency Situations

You shouldn't rely on a student credit card to pay for expenses you can't afford since this can result in unwanted credit card debt. However, credit cards can come in handy during emergency situations when you need to pay for something unexpected.

For example, if you find yourself needing to book a flight home for a family emergency or get stuck on the road because of a car malfunction, you can use your credit card to pay for services quickly.

Credit cards can be used as fallback during emergency situations.

Drawbacks of Student Credit Card

Opening a student credit card is not the best choice if you aren't ready for the financial responsibility of having a credit card or if another option would work better for your current financial situation.

  1. Lower Credit Limit

One of the drawbacks of a student credit card is that they have lower credit limits than traditional credit cards, meaning that you won't be able to borrow as much money.

Student cards have lower credit limits in place because college students are considered high-risk borrowers. If you're looking for a credit card with a higher credit limit, consider opening a standard credit card instead.

  1. Higher Interest Rates

As mentioned before, college students are considered high-risk borrowers since students typically don't have full-time jobs and are often dependent on a parent or guardian's income. As a result, credit card companies charge higher interest rates for student cards.

Generally, student cards have an interest rate of around 20%, but credit card issuers can sometimes charge 27% or more. If you neglect to repay the money you borrow on a student credit card, you could face compounding interest charges that put you in massive debt.

Because college students are high-risk borrowers, student credit cards have higher interest rates and lower credit limits.

Frequently Asked Questions

Should I Open a Student Credit Card?

The decision to open a credit card of any kind, including student cards, depends on your individual readiness to take on more financial responsibility. If you think that you'll struggle to keep track of credit card payments and use a student card responsibly, opening a credit card may not be the best choice for your financial future.

However, if you feel prepared to take the next step toward preparing for financial independence after graduation, opening a credit card is a simple and easy step to helping your future self.

What are the Best Student Credit Cards?

There is no one best student card. The best student credit card for you will depend on your spending habits. Look for a credit card that rewards you for your typical spending activity, such as credit cards that offer cash back on entertainment purchases, grocery stores, and restaurants.

What Alternatives are Available for Student Credit Cards?

If you have an independent income from part-time jobs and internships and/or are over the age of 21, you can consider opening a standard credit card instead of a student card. Standard credit cards have higher credit limits and lower interest charges.

Alternatively, if you don't feel ready to open your own personal credit card just yet, you can apply to be an authorized user on a credit card owned by a parent or family member. As an authorized user, you can make credit card purchases and even build your credit score alongside the primary cardholder.

Additionally, as an authorized user, you won't be responsible for making credit card payments. This is a great option if you aren't ready to be more financially independent but want to start building your credit history.

Now that you understand a student credit card, you're ready to start planning for your financial future! Check out more personal finance tips for college students on our Bold.org blog, including information about private student loans and tips for paying off your student loans. Also, be sure to create a free Bold.org profile to access scholarship opportunities that can help you pay for college.