What Is A Student Credit Card And How Does It Work?

So, you're a college student, trying to understand the world of credit and the tools needed to become financially independent. You've heard about credit cards and how they can be helpful, but may have asked yourself, “Which card is the right one for me?"

You may have an additional option to consider – a student card. But what exactly is a student credit card and how does it work? Read on to learn more.

What Is A Student Credit Card?

A student credit card is tailored to the needs of college students. They offer lower credit limits compared to regular credit cards, which helps students manage their spending habits and avoid unnecessary debt. It’s a type of unsecured credit card, meaning it does not require any upfront deposit or collateral and users can receive a line of credit based on eligibility criteria.

Why Should You Get A College Credit Card?

When deciding on the right credit card, it’s important to consider how it can help you achieve your financial goals. Here are some of the benefits gained from this valuable piece of plastic.

• Build credit: Getting a college credit card early in adulthood is an excellent opportunity to help you build credit. By learning to use the card responsibly and making timely payments, you can establish your creditworthiness. This will be beneficial down the road when you’re making big financial purchases like buying a home or applying for a car loan.
• Use for emergency purchases: Life happens. Having a student credit card can be a safety net for unexpected expenses if you don’t have an emergency fund or any other assistance.
• Earn rewards points: Many student credit cards offer rewards programs that allow you to earn cash back on purchases. It's like getting a bonus for using your card on everyday expenses. By reading the terms and conditions of your credit card, you can discover the specifics of its reward program. Just make sure you’re able to pay back what you spend to earn those rewards. If not, they could actually cost you more money instead of benefitting you.

How Do Student Credit Cards Work?

How To Qualify For A Student Credit Card

Obtaining a student credit card usually requires meeting certain criteria, including some of these common requirements:

• Age: Many credit card issuers require applicants to be at least 18 years old to apply for their college credit card.
• Credit history/score: Student credit cards are specifically designed for people who are just beginning their credit-building journey, so having little to no credit is normal when applying.
• Income and/or job status: Income requirements for student credit cards are generally flexible. You do not need to have an excessive amount of earnings to get approved. The credit issuers are using your income to determine how much to allow on your credit line and whether you have the means to make timely payments.
• School enrollment status: Most student credit cards require applicants to be enrolled in a college or university. The issuers may ask for proof of enrollment, such as a student ID or acceptance letter.

Pros Of Student Credit Cards

 A few benefits of using a student credit card are:

• Beginner-friendly option to build credit
• Safety net for emergency expenses
• Aid to understanding positive financial habits
• Potential cashback and rewards points on purchases

Cons Of Student Credit Cards

While having a student card can help you meet financial goals, it’s important to analyze the potential disadvantages that may rise. Here are some potential drawbacks:

What’s The Difference Between Regular And Student Credit Cards?

While both student and regular credit cards have very similar functions, their differences play a significant role in obtaining plastic power. A few of these differences include: 

• Eligibility requirements: Regular credit cards generally have stricter requirements to apply. The card issuer may want the applicant to have a higher credit score and request proof of income. Meanwhile, student credit card issuers expect individuals to apply with limited or no credit history, making them more obtainable for students.
• Credit limits: Student credit cards typically have lower credit limits, which can serve as a safeguard against unreasonable spending and encourage responsible credit habits.
• Interest rates: Student credit cards often come with higher annual percentage rates compared to regular cards. This is due to the higher risk associated with providing credit to individuals without an established history. These high-interest rates can be detrimental to your ability to pay off your debt. That's why it’s essential to pay off your credit card in full each month to ensure you don’t fall behind. 

How To Find The Best First Credit Card For Students

Alternatives To Student Cards

• Apply for a secured credit card: This type of credit card requires a cash deposit to the lender that will act as your credit limit. It’s a great alternative for students who want to have more control over their spending limit or do not qualify for traditional student credit cards.
• Use a debit card: While a debit card does not help build credit, it allows students to use money in their checking account to manage their financial habits and build better budgeting skills without the risk of accumulating debt.
• Get a prepaid credit card: Prepaid credit cards work similarly to debit cards. They’re loaded with a specific amount of money, allowing you to spend up to that limit. You won’t need to make a monthly payment, since you paid the limit upfront.
• Become an authorized user: Becoming an authorized user allows you to piggyback on a primary cardholder and use their credit history to benefit your creditworthiness. People typically join their family or close friends who have well-established or reliable credit ratings. Just make sure you uphold your responsibilities of card use. If you miss a payment or can’t make one, you could negatively impact the other person’s credit.

The Bottom Line: Student Credit Cards Can Kickstart Your Credit Journey

Student credit cards can be valuable tools for college students looking to establish a credit history and learn responsible financial habits. They offer the opportunity to build credit, handle emergencies and even earn rewards. Just remember to use your card wisely, make your payments on time and stay within your credit limit.

If you're ready to begin your credit journey, consider downloading the Rocket Money℠ mobile app. It can help you monitor your credit score and provide personalized financial insights so you can take control of your financial future and start building your credit