Credit Cards For Students - Everything You Must KnowMarch 29th 2022
If you’re a college student, consider looking into credit cards for students. There are hundreds of attractive options with many benefits. Credit cards aren’t as bad as most people think, and for students, they are often the path to future credit.
What are Credit Cards for Students?
Credit cards for students are often the gateway to more credit options as you transition into adulthood. In college, you’re unlikely to secure an auto loan or even a personal loan because most college students don’t have established credit yet.
A credit card can establish the credit history banks look for and are often much easier to obtain. Most students have many choices for credit cards, even if they’ve never had one before. Using a credit card the right way can be the best way to build credit.
How do Credit Cards Work?
Credit cards for students are usually unsecured. This means you don’t need collateral to use the credit card.
The credit card company gives you a credit line that you can spend. They’ll send you a bill for your spending on the same date each month (your billing date) and if you pay the balance in full, you’ll pay no interest.
If you don’t pay the balance in full, you must make the minimum payment, and the rest will accrue interest daily until you pay the balance off in full.
Just because credit cards aren’t secured doesn’t mean you should default on them, though. Not paying your credit card bill leads to a bad credit score and difficulty securing future credit.
Aren’t Credit Cards Bad?
Credit cards have a bad reputation, but that’s only because many people don’t know how to use them. If you get a credit card as a student and learn to use it responsibly, a credit card can be a great tool in your personal finance toolbelt.
Try to avoid charging more than you can afford to pay off in full. If you do, create a plan to pay the balance off as fast as possible to avoid excessive interest charges.
Why are Credit Cards Important to your Personal Financial Health?
Credit cards for students are important to your personal financial health because they often start your credit history. Proving you can use a revolving credit line responsibly, paying your bill in full, and not defaulting on your credit card is the start to a solid credit history.
Your credit score is comprised of five factors, but credit cards greatly affect the top three:
Important Credit Card Terms you Must Know
Before you secure credit cards for students, here are some important terms you should know.
The grace period is the time in between when you charge something on your credit card and when the bill is due. The average grace period is 25 days from start to finish. Within that time, interest doesn’t accrue.
Credit card companies charge a fee if you don’t pay your balance off before the grace period ends. The fee is a percentage of your balance and is called interest. Most credit cards charge interest daily on your balance, so the faster you pay the balance off in full, the less interest you’ll pay.
The bill date is the date the credit card company bills you for all charges that occurred between the last billing date and the current one. These are the charges you owe now, and if you don’t pay them off in full will accrue interest.
Most credit cards for students don’t have an annual fee, but always read the fine print before accepting a credit card to be sure. An annual fee is a fee credit card companies charge for access to your credit line. As a student, they are unnecessary.
Your available credit is the amount of the credit line you haven’t spent yet. For example, if you have a $500 credit line and are charged $100, your available credit is $400.
This is the amount you charged on your credit card. You can pay the balance in full (recommended) or make the minimum payment and carry a balance that accrues interest.
This is the minimum amount the credit card company will accept to make good on your balance each month. It’s often 1% - 2% of the balance with a $10 minimum in most cases.
Reasons to Consider Credit Cards for Students
Even if you think you don’t need a credit card, here are some common reasons to carry one:
Find the right credit cards for students for your needs. Just like standard credit cards, students have options including reward credit cards, secured credit cards (if you have bad credit), or even store credit cards, like the Target RedCard.
Establish your credit now with responsible use of credit cards and see how easy it is to transition into adulthood with a solid credit score and credit history backing you up.
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