If you're a college student, you know how quickly the expenses can add up. In addition to tuition, fees and books, you need money for supplies, for occasional additions to your wardrobe, for gas if you drive a vehicle, for a meal out or for a movie with friends. But visiting the ATM to withdraw cash can be a hassle and it's not always safe to carry a lot of cash. So when the offer of a credit card designed for students reaches your mailbox, you're probably tempted to apply. Is that a good idea?
It can be-if you understand the basics of credit and the impact that using a student credit card can have on your financial future. Here are a few questions to consider.
Student credit cards are great to have on hand in an emergency and certainly convenient to use at most other times. But before you fill out any credit card applications, ask yourself not only how you'll use the card but also how you'll pay off what you owe.
It's all too easy to whip out your card at every store or restaurant and lose track of what you're spending in a month. It can be a big shock to open a statement (or a web page, if you've opted for paperless billing) and see how much money you've spent in a few weeks.
You can pay only the minimum on your credit card statement each month, but that's a good way to get in debt over your head. In addition, since you'll have to keep paying interest on the unpaid balance, a pizza that cost you $10 could end up costing you double by the time you make your final payment.
Before you sign up for a student credit card, make a plan as to how you'll control your spending and how you'll make payments. You could reserve your credit card only for emergencies or for school-related expenses like books and supplies. If you're working, earmark part of your paycheck so you can pay off your credit card balance each month. If your parents have agreed to help out with your credit card expenses, make sure that you both understand how much they're willing to put towards your monthly bill.
Reading student credit card offers can be like taking a college class in a foreign language--you'll see a lot of terms that are unfamiliar or confusing. For example, do you know what's meant by the APR (annual percentage rate)? And what's the difference between an intro purchase APR, an intro balance transfer APR and a regular APR?
Before you decide on a credit card, take the time to familiarize yourself with important credit card terms. Check out the Federal Reserve's credit card glossary or the credit card contract definitions from the Consumer Financial Protection Bureau.
Some banks allow you to apply for a student credit card without a co-signer. Others require that you have someone over 21 sign the credit card contract and to assume with you the financial responsibility for that card.
At CreditCardXPO’s Student Credit Cards page you'll find a variety of cards that offer cash back on purchases, bonuses when you pay your bills on time and/or extra points if you sign up for paperless billing. Compare offers to see which one works best for your particular situation.
A student credit card can be a great way to build a good credit rating. But misusing a credit card and getting too heavily into debt while you're a student can harm your financial future for years to come. That will make a big difference in the interest rates you'll pay for loans for cars or home purchases.
The bottom line on student credit cards? If you decide you want a credit card, make sure that you also decide to use it wisely.