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What Is a Student Credit Card?

A student card is designed specifically for those who are in college or grad school. Credit card issuers understand that young adults may have a limited credit history, so these cards are easier to get. A student credit card is a good way to build credit before you graduate.

Student cards usually have smaller credit limits because they're designed for those who have little credit. Many of these cards have rewards, so you can save money on specific categories, such as gas or groceries.

But before you apply for a student credit card, make sure you're ready for the responsibility. Cards are a great way to build credit, but if you don't use them the right way, you can end up in credit card debt.

How to Use Credit Cards Responsibly

I've always believed that college is a great time to build credit, but only if you use your student card responsibly. This means you must follow my No. 1 credit card rule: Always pay your balance in full and by the due date.

I'm going to confess something to you. As soon as I graduated from college, I got into credit card debt because I didn't understand what "responsible use" meant. To me, a credit limit was a mere suggestion, not a rule I was supposed to follow.

I spent two years clawing my way out of credit card debt. I started using a budget and tracked my expenses. Ever since then, I've been passionate about financial literacy, especially when it comes to credit cards.

So set yourself up for credit success by never carrying a balance. When you graduate, you're likely to have student debt to pay off. The last thing you need is to have credit card debt, too. To stay out of credit card debt, create a budget while you're in college and track your expenses. Set up payment reminders via email or text messages so you never miss a payment. Do this and you'll build a solid credit history and develop a good credit score.

Seek a credit card that offers prequalification, and don't apply for more than one card at a time. Each credit card application results in a hard credit inquiry, which can take off up to five points off your score.

If you're under 21, you'll need to show proof that you have enough income to cover any debt you incur. You also must be enrolled in college or grad school to qualify for a student credit card.

Pros and Cons of Having a Student Credit Card

Pros

1. You can learn good credit habits and graduate with some positive credit history, which could allow you to rent an apartment and make major life purchases.
2. Issuers may offer miles, points or cash back rewards for every dollar you spend to enhance the value of your card and encourage you to use it.
3. Many credit card companies offer zero liability protection if your credit card or card number is lost or stolen and will not hold you responsible for any unauthorized charges.

Cons

1. Student cards come with lower limits than regular cards because users have no history showing they can use credit responsibly.
2. Rates are usually higher than on other types of cards because students have little to no credit history.
3. Some student credit cards earn cash back or other rewards – but often at a lower rate than regular cards.
4. If you blow your budget and stop making your credit card payments, you will hurt your credit score and owe late fees.

How Can You Compare Student Credit Cards?

Consider these questions as you compare student credit cards to help you choose the right one.

1. Does the card provide your must-have features? Look for a student credit card that charges no annual fee and reports to the three major credit bureaus. Check for no foreign transaction fees if you plan to travel or study abroad.
2. What are the rates and fees? These vary by credit card issuer, so you must take time to read the fine print. Look at the annual percentage rates, and check for annual fees, foreign transaction fees and other fees that might be hidden in the disclosure statements.
3. Do you have a chance to earn rewards or a sign-up bonus? Rewards can be an incentive to use your student credit card responsibly. Just make sure you can earn rewards for routine spending, such as gas, grocery and restaurant purchases. Otherwise, look for a card that offers a flat rate on all purchases.
4. Does the card require a security deposit? If you don't get approved for a student card, another option is a secured credit card. These cards require security deposits, but if you use the card responsibly, it's a good way to build credit.
5. What happens to the card when you graduate? Some issuers will transfer your student account to a standard card, and others will require you to apply for another credit card.

Why Is Building Credit Important for College Students?

1. Good credit can help students land jobs. An employer may want to check your credit when you apply for a job but will need your written permission. Your credit report can give the employer an idea of how you handle responsibilities. What employers can access varies by state, but they won't be able to see your credit score. Some states have prohibited employers from using credit reports in the hiring process.
2. Credit can affect auto insurance rates. In some states, your credit score is one of a number of factors auto insurers may consider when issuing and pricing policies. A good credit rating can drive down car insurance costs.
3. Good credit can make renting an apartment easier for students. Your credit score depicts your creditworthiness, and the higher the score, the better you look to a landlord. That is especially true in a competitive rental market. You may also get the benefit of paying a lower security deposit. A FICO score of 670, which falls in the good range, can be helpful to rent an apartment, but keep in mind that cutoffs vary. The landlord may take a closer look at your credit details if your score is in the mid-600s or lower, according to myFICO, the consumer division of credit analytics firm FICO.
4. Good credit is necessary for financing a home or car. A good credit history can help you qualify for a mortgage or car loan with a favorable interest rate. The higher your credit score, the more affordable your monthly payment could be. Even a difference of 20 points between credit scores can add up to thousands of dollars in savings over the life of a loan.