Are Credit Cards Good For College Students?

One of the biggest concerns for college students is how they are going to finance themselves during the period they’ll be in school. Sometimes the odd jobs that are available barely keep you afloat, so let’s explore having a credit card as a way of financing yourself in college. Let us know more detail about ‘Are Credit Cards Good For College Students?’.

Are Credit Cards Good For College Students?

Are Credit Cards Good For College Students?

What is a credit card?

A credit card is a type of payment card in which charges are made against a line of credit, instead of the account holder’s cash deposit.

Unlike most loans, a credit card does not need a guarantor or collateral making it easily accessible.

Types of credit cards

We have broken them into types of credit cards with  different credit cards offered:

  1. Reward credit cards. With these types of cards, you can enjoy perks such as cash backs, bonuses, and airline miles and earn points each time the card is used.
    1. Such cards include; reward credit cards, travel credit cards, store credit cards, and lastly co-branded credit cards
    2. Low-interest credit cards.
      1. Such cards can be ideal when you want a nice break from paying interest charges, want to make a large purchase and pay it off over some time, or even want to keep your personal and business expenses separate Such cards include; balance transfer credit cards, zero percent intro APR and low-interest credit cards and finally business credit cards
  2. Credit building cards. These cards are ideal for those first-timers who don’t have much experience with credit. Application requirements are not as strict. These cards include; secured credit cards and student credit cards.

So let’s have a little breakdown of the secured credit cards and student credit cards since they are more applicable. With secured credit cards, you are required to put down a cash deposit in which you can get your deposit back if the account is closed or can serve as a great way for you to build your credit score. Student credit cards are specifically targeted towards young people with limited credit history application requirements are not strict and most cards don’t have an annual fee while still enjoying perks in form of cash backs or rewards at restaurants.

Credit cards are paid off at a later date mostly at the end of the month. You also need to have an understanding of your credit limit determined by your credit score (your ability to pay back borrowed money).

What is needed during your credit application? 

You will need to provide:

  1. Legal name
  2. Birthday date
  3. Address
  4. Social security number (allows users to check your credit score dictating whether you get the card or not)
  5. Annual income

What happens when you fail to make payments on time?

  1. The unpaid balance may accrue interest
  2. The debt lowers the account holder’s credit score 
  3. The account may become suspended. If not paid off the amount may be closed after some time as agreed by the banks’ regulations and reported as charged off  to credit bureaus
  4. This May lead to a decline in future loan applications and credit cards
  5. A credit card report can be used as part of the interviewing process in future jobs 

Reasons why having a credit card in college is great 

  1. Allows you to build your credit score, and improve your credit limit. Paying your monthly balance on time shows lenders that you are reliable and responsible. This allows you to graduate with 4 years of positive credit history making future loans easily accessible with higher amounts. 
  2. Helps in teaching responsible spending habits. All credit cards do have their limits and can attract penalties when crossed. It’s therefore encouraged to spend money on the things needed than wanted.
  3. Have help with emergencies. Whether you need the money to seek medical attention, repair your car, or do an impromptu emergency trip a credit card can be a lifesaver since you would have the funds needed readily available.
  4. Receiving cardholder perks. Credit cards come with promotional perks.  This can be through earning instant cashback or 0% APR during the first year of using it, this helps with saving money and learning accountable spending. 
  5. Security. Having a credit card makes it easier to avoid fraud. When using cash or debit money instantly goes missing when lost or stolen however, with credit cards the holder can notify the credit card company of any unauthorized transaction and you don’t have to pay as the company resolves the matter and a new card will be provided if the account was compromised. 
  6. Budgeting. As the cardholder you are aware of the available limit this can be used on recurring expenses such as food, rent, and buying school supplies which helps avoid unnecessary spending. 
  7. Helps You get organized. Having a credit card can be a great way to separate your savings from your monthly expenditure 
  8. Qualifying for better student loans. Applying for a card and using it responsibly can help raise your limit and get you lower student loan rates. 

Financial tips you can try and implement while having a credit card

  1. Try living below your means. Cutting down on expenditure means you’ll probably want to always check on your “needs” first before your “wants”.
  2. Get a job. If you already don’t have a part-time job try getting one this is to help you find a way of eventually paying off the credit card at the end of the month. 
  3. Look for ways to spend less. Reduce the number of times you order fast food and try more home cooking. If you are entertaining guests make it a “bring your own drink” type of party. 
  4. Create a budget. Estimate the amount of money you spend in a month on groceries, rent, utilities, and school supplies this way you’ll know how much money you have before you cross your limit. This ensures that you are prepared in case you have an emergency and need extra cash.  
  5. Keep track. Blowing your whole credit card limit in a weekend can leave struggling for the rest of the month, so remember to stick to your budget and if you don’t need to go out you can always stay indoors.  
  6. Be responsible. Just because you have money readily available doesn’t mean you have to spend it. You’ll still need to pay it back at the end of the month otherwise you risk being suspended and attracting high-interest rates on your credit card. Remember credit card debt reflects on future loans and job interviews. 

Now we have learnt ‘Are Credit Cards Good For College Students?’, Having a credit card is great but remember it comes with the responsibility you’ll need to put your priorities first.