While facing deep economic insecurity this fall, college students are returning to school or logging on from a distance. There are still ways for college students to establish financial independence before they graduate, even though the Coronavirus Pandemic may have destroyed some job opportunities.
Strong credit histories can be helpful to students when applying for loans, getting credit, or finding an apartment. Students who establish strong credit now will reap the benefits in the future.
Having a student credit card can be a powerful tool in the college student’s credit arsenal.
How Student Credit Cards Work
Credit cards for students work the same way as traditional credit cards. Purchases can be made up to a credit limit, and purchases that aren’t paid off quickly accrue interest. Students can establish their credit history over time by reporting their credit card activity to the credit bureaus in their name.
A student card is more likely to be approved for students with a limited credit history than a traditional card, but approval is not guaranteed. Typically, students must pass a credit check and prove they are enrolled in college. Students under the age of 21 must show they have sufficient income to pay their bills.
Benefits Provide Additional Value
A student credit card with additional benefits may be a good option for the cash-strapped student. Some credit cards offer additional rewards for specific categories such as gas and restaurants. Students who maintain a good grade-point average can earn cash back or statement credits from some credit cards. For a limited time, low introductory interest rates can help students avoid paying interest on purchases or balance transfers.
Don’t forget to look at annual fees, interest rates, and other costs when evaluating credit cards. In general, they should avoid unnecessary fees and find the lowest interest rate possible.
Using the Card Responsibly
Paying credit card bills on time is the most important thing students can do. It establishes a record of timely payments, which is important for credit. A cardholder may be able to transition to a traditional credit card after making timely payments for a period of time.
Ideally, cardholders should pay off their entire credit card balance every month, to avoid interest charges and accumulated debt. Having a low balance also prevents a high credit utilization rate, which can negatively impact your credit.
*Credit Healing LLC is NOT a bank, lender, home improvement or insurance company. Offers made on this page are offers for services by independent parties and are not companies of Credit Healing LLC.
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