How to Pick a Student Credit CardSeptember 18, 2010 - 9:30 am
Students, you have to be especially careful when you apply for a credit card. Your limited income makes it easy to charge more than you can afford to repay. Credit card issuers are more than happy to let students rack up loads of credit card debt. That’s because issuers are betting your parents will help pay off your credit card bills. That’s not a guarantee, though. What if your parents can’t afford to pay your credit card debt? What if they decide it’s time for tough love?
When you’re choosing a student credit card, keep these things in mind to help keep you out of debt.
No annual fee
You’ll find many student credit cards that require you to pay a yearly fee simply for the convenience of having the credit card. But, the best student credit cards don’t come with an annual fee. The only exception is a student credit card that has a great rewards program.
Low interest rate
Just because you’re new to credit doesn’t mean you should pay unbelievably high interest rates. (If you have a bad credit history, that’s a different story.) Look for a student credit card that has a low interest rate. That will reduce the amount of interest you pay on balances you carry beyond the grace period.
Rewards that are easy to understand
Whether you need a student credit card with rewards is debatable. On one hand, having credit card rewards could encourage you to charge more than you can afford to repay. On the other hand, though, credit card rewards allow you to earn cash back and merchandise on the charges you make.
If you choose a student credit card that has a reward program, make sure the details are easy to understand. You should know what you earn for every dollar you charge and what it takes to redeem your rewards. Watch out for maximum rewards accumulations and reward expiration dates.
Low credit limit
Many credit card users dream of a high credit limit that would allow them to charge to their heart’s content. When you’re just starting out with credit, a low credit limit is best. That way, there’s little danger of you running up a seriously high credit card balance. As you prove that you can handle small credit limits, your credit card issuer will gradually raise your credit limit.
Income or cosigner
New credit card rules say that consumers under age 21 must provide proof of income to get a credit card. If you don’t have income, you’ll have to get an adult who does have income to cosign your credit card application. This rule is intended to protect young adults from credit card issuers who were known for giving credit cards to students who didn’t even have a job.
Read the Credit Card Disclosure
Read the credit card disclosure every time you apply for a credit card, whether it’s a student credit card or not. The credit card disclosure includes everything you need to know to make a decision about the credit card – the interest rate and credit card fees.