The ABCs of Student Credit Cards

/ BY / Students

Until a few years ago, it was relatively easy to get a student credit card if you were a college or even a high school student. Credit card companies flooded students' home mailboxes and college campuses with offers, and most students who applied were approved.

That situation changed in 2010, when the federal CARD (Credit Card Accountability, Responsibility and Disclosure) Act went into effect. These days, students have to be at least 21 to qualify for a student credit card, unless they can prove that they have a part time job and/or can get their parents or other responsible adult to co-sign the application.

Are Student Credit Cards a Good Idea?

It's always handy to have a credit card for emergencies—when your car breaks down, for example, or when you have to unexpectedly replace a computer that's required for your class work. When used responsibly, a student credit card can help you build a good credit record. Establishing a record of paying credit card bills on time can help you qualify or get a better interest rate when you apply for other types of credit, like a vehicle loan on that great new car you want to buy after graduation.

But it's not always easy for college students (or for any of us) to resist the temptation to charge items that they don't really need and maybe can't afford. When you're out shopping and see a great new outfit, or when you're feeling bored and decide to charge a movie and a pizza, it can be hard to remember that you're going to have to come up with the money at the end of the credit card billing cycle to pay for it all.

Failing to keep up with payments on a credit card—like failing a college class—can impact your life for many years. A bad credit record can hurt your ability to get a loan and/or other credit cards. You'll also have to pay a higher interest rate on auto loans and on any other credit cards you might want to get.

Another factor to consider is student loans. If you're already facing substantial debt once you graduate from college, the last thing you want to do is add to that burden by getting in over your head with a credit card as well.

How to Choose a Student Credit Card

You'll find both prepaid and traditional student credit cards on our site. Although you can use a prepaid card like any other credit card, it's actually not a credit card; it's really an ATM-type card that you preload with funds. When the funds run out, you can't use the card again until you "recharge" it by adding more money to it. (You can arrange to have regular deposits made to the card.)

You should know, however, that prepaid cards don't help establish your credit record, because the banks that issue them don't report to the credit agencies. (They're not really extending you credit; you're paying with your own money.) There are fees—sometimes steep—that come with using prepaid credit cards, but they can be very handy if you want the convenience of a credit card without the worry that you'll get too far into debt.

If you decide that you want a more traditional type of student credit card, compare offers carefully. You'll want to check on details such as the annual percentage rate (APR), any fees for setting up and/or maintaining the account each year, the number of days you have to pay off the card once you've received your statement and any penalties you'll have to pay if your payment is late.

The Federal Reserve Board has a very informative Consumer's Guide to Credit Cards that explains various credit card terms. It can help you make an informed decision on which student credit card you want to apply for.

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Please note your financial situation is unique and our tips & advice presented here may not be appropriate for your situation. recommends that you seek different advice & opinions from your own accountant or financial adviser who understands your individual circumstances before making any important decisions or implementing any financial strategy.