Should I Get a Student Credit Card?
Student_credit_card

Parents have the responsibility of making their children understand the value of money and spending wisely. One of the best ways to do so is by giving them the student credit card. There are many credit card companies and banks that offer great guys that are exclusively designed for students. There are two types of credit card plans, namely the secured and the unsecured ones. Credit cards also help the students in building their credit scores when they are young.

However, students will need to understand the importance of spending wisely, especially when they have the power off receiving credit. Most of the students forget their credit limit when they are shopping for their favorite things.

This happens mainly because they do not understand the value of the money. The student’s credit card will help them to manage the money wisely, and maintain a good credit history. They will be able to understand their spending patterns by checking out the monthly statements.

Credit card companies also provide excellent offers to attract the students such as 20% cash back bonus if you make your first purchase within 3 months of time. The annual percentage rate is 0% up to 6 month period of time.

How to get a student credit card?

There is a systematic procedure to obtain a credit card. The student must first fill in an application form, which is available through the online service or you can visit the nearby bank to get the application form. In order to reduce some risk factor, the parents can co-sign for the card. Then the following proof is needed to verify the identity:

  • Residence address proof

  • Passport size photo

  • College ID card

After the submission of the required documents the company will verify and provide you the student credit card in your name.

Some of the benefits of using this type of credit card are:

  • It is very useful during an emergency situation and you must learn to differentiate between emergency and purchasing an item.

  • Many credit card companies offer reward for every purchase that they make. The reward is remitted as cash back or points.

  • Students need not carry large sums of money with them because it can be stolen or lost. If the student credit card is lost you can report to the respective company.

Important things about student credit card

  • In order to apply for a student credit card, the respective student must be over 18 years of age.

  • These cards generally require parent or guardian sign as a guarantor.

  • This is considered as the learning tool for the student to build a good credit score

  • The credit limit for the student card is very low when compared to the traditional credit cards. The credit limit usually ranges from $500 to $1000.

  • A good credit history will help the students to seek housing rental, mortgage loans and employment checks in future.

  • Generally, credit card companies do not impose any annual charges for student credit card, but some banks ask the card holder to pay annual fee for it.

  • A simple way to build a credit score is by making small purchases rather than big ones.

  • The rate of interest for the card is slightly higher and it ranges from 13.99% to 20.99% (annually). To avoid additional interest charges, you can pay your bills every month.

  • Credit card also offers internet booking facility to track and manage their expenses. Some other features are text SMS and email reminders about your payment dues. Automatic bill payment options are also available, so that you can pay the bills on time.

  • You can consult your parents or financial advisors to use the credit card responsibly.

Different types of student credit cards

Secured type of student credit card works like debit cards and many parents prefer this type of card. Students can spend only the money that is available in their account and parents can pay their child's allowance directly to the account. In this card there is no chance to build debt and the line of credit is not extended in this method.

The unsecured student credit card works like a usual credit card. You need not make front payments using the credit card because the line of credit is extended. They can also take up educational loans if required. On the other hand, you have to track your payments or else it will lead to debt. Then it will be difficult for the student as well as the parent to overcome from this debt.

Try to choose a credit card type that suits your financial situation, so that you can handle it better.

Tips

Sometimes, it is very difficult for the students to manage money wisely from their childhood. Many students leave colleges or schools with thousands of dollars in debit or credit card because of the money management problem. So, it is very important to understand how credit card works and how to cope up with the financial crisis.

Students, who live in hostels, which are away from home, need this type of credit card, so that they can purchase things that they are in need of. If you don’t have any source of income to pay back the bills then try to find a company, which offers lower credit limit. Sometimes, it is very beneficial to set up clear guidelines for credit card use.

Mistakes to be avoided

College students seek a student credit card because it grants them flexibility in purchasing items. Most of the students will be handling such huge amount for the first time. Some of the common problems that young people might face while using the credit card are:

  • The students accept the first credit card offer and they do not analyze the pros & cons of it. Shop around at least 3 or 4 companies to a find a suitable credit card according to the needs.

  • Most of the students don’t keep in mind that paying bill is very important and they miss payments. This will end up in paying a higher rate of interest and penalty fee.

  • Spending over the limits will end up in bad credit card history and it will be difficult for them to borrow in future.

  • Most often exceeding beyond the budget limits and swiping all the money in the account for the month. So, sit down figure out the amount that you can afford for monthly expenditure.



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