Student Credit Cards
Prepaid credit cards and other credit options for students
Student credit cards, when used properly, can help you establish a good credit rating that will make your financial life much easier once you leave school and join the workforce. However, given that most students face a lot of expenses and have limited incomes, it is especially important that you manage your student credit card responsibly. Otherwise, you'll already be behind the 8-ball before your financial life has really had a chance to get started.
Options for Student Credit Cards
If you're a young person with no credit history, a prepaid credit card is a good way to get started. These credit cards are secured, meaning that the lender has collateral — your cash — to prevent any possibility of payment default. The vast majority of high school student credit cards are of the prepaid variety.
If you're a college student with a lengthier employment history, you may qualify for a specially designed college student credit card. These cards typically have a modest credit limit and reasonable interest rates with a lack of annual fees. They make practical things like online shopping and renting a car much easier, and it's always nice to know you can access a little extra money if you're falling short towards the end of the semester.
Avoid Credit Pitfalls
While student credit cards can make life easier in the short-term, they can just as easily land you in financial hot water if you're not very careful about how you use them. The temptation to go on shopping sprees or finance impulsive purchases is something many young people fall victim to, but even responsible students can get in trouble. After all, school is expensive, and sometimes, there just isn't enough money to get you through. You wouldn't be the first student to max out a credit card simply because you had no other money and you had to eat somehow.
Student credit card debt can be worsened if you're not completely familiar with all the ins and outs of the card's terms and conditions. Many student credit cards offer borrowers low introductory rates, then crank up the interest after the trial period ends, at which time the student has often reached the borrowing limit. Beware of low interest credit cards that promise rock-bottom rates; there are likely strings attached.
The rule of thumb to follow is this: if you have limited income, don't use student credit cards to make purchases unless you absolutely have to. When you do use the card, pay it off as soon as you possibly can, and always find a way to make at least the minimum monthly payment if you're strapped for cash.