Student credit cards, as the name suggests, are targeted toward the student community. This means that such cards are created to meet the specific needs of students and young adults in general. However, just because a credit card may be called a ‘student credit card’ does not guarantee that it operates in your best interest.
As with any credit card, it is essential to understand the terms and conditions of a student credit card before you sign up. Though a card may claim to be geared at helping students, it may also have fees that put you at a disadvantage.
As such, identifying what you need from your credit card as a student will help you make an educated decision about which card is right for you. In this article, we will explore five different factors you should consider.
1. Interest Rate
The interest rate is clearly the most important factor for students when it comes to choosing a particular student credit card. To the furthest extent possible, they would like to have a credit card with the lowest rate of interest. The relevant term here is APR or Annual Percentage Rate and it refers to the applicable interest rate on an annual basis.
Most often, APR on credit cards for students tends to be a reasonable 18%. In some cases, it is lower than that too. However, some student credit card’s APR goes higher than 20%. These cards should generally be avoided, as you can get lower rates elsewhere.
You may presume that credit card rewards are not that important to students when they have other critical aspects such as expense management to consider. Nonetheless, the fact is, they do really look at rewards as an important aspect when choosing credit cards for themselves, and rightfully so.
That is because rewards on student credit cards are tailored to the needs and expectations of students. Imagine getting easy entry to that coveted rock show which is clearly the talk of the town?
Credit card companies suitably tailor their reward point offerings on student credit cards such that they really appeal to them. Students have clearly realized this and therefore look at reward points as an important part of the decision.
3. Annual Fee
The annual fee on credit cards is yet another vital factor for the student community. Typically, they would like to avoid annual fees altogether. Credit card companies are aware of this and therefore, you will be hard-pressed to find any credit card for students that do charge an annual fee.
With most students ending up carrying a balance on their credit cards, credit card companies end up earning reasonably well from students in interest income anyway. Therefore, they really do not mind forgoing annual fee earnings on student credit cards.
4. Building Credit
For the vast majority of students, building credit is an important reason for which they would like to have student credit cards. After all, prior to this instance, most of them do not have a credit history of any kind whatsoever.
Without an established credit history, when the time comes for students to avail mainstream credit, say in the form of a property mortgage or a business loan, they will find the going rather tough. That is the reason, while they are still students, it is important for them to build credit.
Bear in mind that being students, they would in any case not be eligible for a lot of other credit facilities. Further, credit cards are a relatively easy credit instrument for them, with banks offering specialized student credit cards.
5. An Addition to Student Loan Debt
Most students are already under the burden of student loan debt. Today, the United States has reached a stage where student loan debt has crossed the trillion-dollar mark. In such a scenario, holding a credit card is akin to having yet another debt instrument, which will only add to the already heavy credit burden.
At the same time, credit cards clearly offer a wide array of benefits, especially when we look at the fact that there are specialized student credit cards on offer. So, it is really a fine balance, a trade-off that most students have to consider. However, it is important to make consistent payments on all debts.
Student credit cards are an essential element of the everyday life of most students, especially in the United States. Ultimately, as with regular credit cards, it is all about maintaining financial prudence. When you can repay credit card dues in full at the end of each billing cycle, credit cards for students genuinely prove to be a very useful option.
Disclaimer: All credit products carry risk. Be aware of these risks by reading the associated terms and conditions.