College is a great time to begin developing both your credit and your personal finance skills. A student credit card can be very useful for this purpose, but it’s not for everyone. Even you think youre ready for one, you may not be eligible. There are some alternatives, however. Heres what you need to know before you apply for a credit card as a college student.
Eligibility
You may not be eligible for a credit card. If you’re under 21, youll have to prove you will be able to pay your credit card bills. Proof could include a pay stub or a checking account statement. Youll therefore either need savings or a job. Even a part-time job could be sufficient. If you’re not eligible, you’ll need someone to cosign. A cosigner is either a parent or a guardian who accepts the financial responsibility for the payment of your credit card bill.
Secured Cards
Another option if you’re having eligibility problems is a secured card. With a secured card, you make an initial deposit that will serve as 50% to 100% of your credit limit. When you make purchases, the purchase amount is deducted from your available credit. Youll get a bill each month. When you pay the bill, you replenish your credit. A secured card is has similarities to a debit card, but it helps to build credit. Be aware that the signup fee can be a few hundred dollars, and there may also be an application fee.
You Shouldnt Get a Card If…
Some college students, even if they are eligible, shouldn’t get a credit card. If any of these describe you, you should stay away from credit cards.
If you think you will carry a balance on your card, it’s best to have no credit card at all. There’s no need to add interest fees to your (probably) already limited funds.
If you don’t know how you will use the card, or exactly how you will pay for it, don’t get it. Without a plan, you’re setting yourself up for some serious credit mistakes.
If you can’t control impulse purchases, don’t get it. You may soon find yourself in the hole, with no way to get out.
Online or Mobile App Card Management
If you’re like most college students, you aren’t inclined to deal with paper bills. It’s much more convenient to take care of bill paying and account management online. Look for a card with online bill pay or that offers a mobile app. You’ll be glad for the convenience.
Interest Rate and API
Look for the lowest interest rate and APR you can find. These numbers will give you an idea of how much it will cost to keep a balance. Don’t plan on keeping a balance, but sometimes circumstances get out of our control, and low interest rates and APR will ensure that you don’t pay more than you have to.
Fees
Fees can pop up and surprise. When you’re living month-to-month, as many college students are, unexpected fees can create a small financial disaster. Make sure, therefore, to research and inquire about all fees, including hidden ones. These may include annual fees, or fees for balance transfers, late payments, or cash advances. Don’t add the extra stress of more fees.
Sam Jones, the author, has been looking at student credit cards on uSwitch as his sons are about to start university and should really start building up a credit score and learning credit responsibility.
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