Secure or student credit cards: which ones to choose


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If you are a student, it can be difficult to get a conventional credit card because you probably have little or no credit history that card issuers can judge you on. In this case, a student credit card or a secured credit card could be the solution. Either type will give you the convenience of a credit card while helping you build a good credit history and a solid credit rating. Here’s how to choose the card that’s right for you.

Key points to remember

  • Student credit cards and secured credit cards are easier to obtain than conventional credit cards for people with little or no credit history.
  • Both types of cards can help you build a credit history and achieve a good credit rating.
  • Secured credit cards require you to leave money on deposit with a bank, unlike student credit cards.

What is a student credit card?

Student credit cards are offered by many major credit card issuers. Most require you to be at least 18 years of age and currently enrolled full-time or part-time at an eligible school. You will also need to prove that you have a regular income or have someone, such as a parent, to co-sign your application for you. If you meet these conditions, you should find a student credit card relatively easy to obtain.

Like other types of credit cards, student credit cards have their pros and cons:

Benefits of student credit cards

  • Early credit construction. When you use a student credit card and pay your credit card bill every month, many card issuers report your payments to the three major credit bureaus. This way you will gradually build up a credit history and a credit score. After college, many life stages, such as getting a mortgage for your first home, could depend on your credit score. Your credit score can also make a difference in your insurance rates, whether a landlord will rent you an apartment, and even whether an employer will hire you. By starting with a student credit card, you can start your credit history on the right foot.
  • Teaches financial skills. If you’re not already good at planning and budgeting, a student credit card can help you track your monthly spending and get into the habit of paying your bills on time. Plus, student credit cards come with deliberately low credit limits, so you have some protection against too much intrusion.
  • Useful in an emergency. Accidents happen. If you’re missing out on school and something unexpected (and expensive) happens, a student credit card can serve as a safety net.
  • Added benefits. Like regular credit cards, some student credit cards come with rewards, such as cash back or discounts at certain retailers, including your school’s bookstore in some cases.

Disadvantages of student credit cards

  • High interest rates. Student credit cards generally have higher interest rates than conventional credit cards because students, rightly or wrongly, are viewed as a greater risk. The annual percentage rate (APR) on many student cards can easily exceed 20%. Of course, the interest rate shouldn’t matter if you pay off your balance in full each month.
  • Low credit limit. Student credit cards typically only provide a few hundred dollars as an initial credit limit. While this can help deter overspending, it may also be insufficient in the event of a costly emergency, such as a major auto repair.
  • Additional charges. Many student cards charge additional fees, such as annual fees, overseas transaction fees (for using your card outside of the United States), and late fees, although you have to do everything in your power to avoid the latter.

What is a secured credit card?

A secured credit card is another option for students with little or no credit history. It can also be an option for people with bad credit history.

With a secure card, you deposit money with a bank, which then serves as collateral. The credit limit on your secured card may be equal to or slightly less than the money you are leaving on deposit. Typically, deposits start at around $ 200. If you close the account later, you can get your deposit back.

Benefits of secured credit cards

  • Construction (and repair) credit. This is by far the most important benefit of a secured credit card. Like student credit cards, secured cards typically report your account activity to major credit bureaus. So, as long as you pay your bills on time, you should be able to build a strong credit history and build a solid credit rating.
  • Can be exchanged for an unsecured card. In some cases, secure card issuers will periodically review your account to see how you are handling your card. If you’ve made consistent and on-time payments, they may upgrade you to an unsecured standard card. You can also apply for a regular card from another issuer, using your current credit history as proof of your creditworthiness.
  • Additional benefits. Some secure cards have potentially useful benefits, such as like credit fraud alerts and free credit monitoring services. Unlike student credit cards, however, benefits such as cash back rewards and travel miles are not very common for this type of card.

Disadvantages of secured credit cards

  • The security deposit. The main reason why you are likely to be approved for a secured credit card is also the main reason why you might be reluctant to get one in the first place. If you are a student with little money, even a few hundred dollars can seem like a lot of money to tie up.
  • Additional charges. Some secure card issuers accumulate additional fees, such as annual account fees and even application fees.
  • High interest rates. Secured credit cards tend to have APRs of 20% or more. Again, this shouldn’t be a problem if you pay off your outstanding balance in full each month.

The bottom line

A student credit card or a secured credit card can be a good way for students to build up a credit history for the future. You can start by applying for a student card, as it does not require a deposit. If you are refused a student credit card, a secured card may be a good alternative.

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