Best Credit Cards for College Students Guide

Best Credit Cards for College Students Guide

Credit cards for college students are a great way to learn how to manage credit properly, get your hands on extra cash when needed, and build credit for your future. In recent years, many credit card companies have set up shop on campuses selling credit cards like hot dogs. And unfortunately, there is no class in college explaining the right way to apply for credit and use it responsibly.

Best Credit Cards for College Students and Financial Literacy

Financial literacy is learning to understand money and credit. Best credit cards for college students are a great are quite different than credit cards for everybody else. As such, there are things you should know before applying for a credit card and especially before using one.

The main difference with best credit cards for college students is that you typically have little to no work history or income. Credit card companies base their decisions on what kind of credit line to extend based on your perceived ability to pay back any balances. But most college students have just come out of high school and if they do work, only have part time employment.

3 different types of credit cards for college students

1. Prepaid Credit Cards for College Students. This is just like a debit card, where you or your parents puts a balance up front on the card and take out the money as you go. This is a great way to begin establishing credit with the companies.

2. Best Credit Cards for College Students with Cosigner. In lieu of your lack of income, the credit card companies will let a parent or guardian cosign for your card like a loan. Because they are now financially responsible, you get the benefits of their credit history and can often get a higher credit line than normal. But you must be careful not to abuse that extra credit.

3. Regular Unsecured Credit Cards for College Students. This can be your first foray into the world of unsecured credit. All you do is sign and the bank gives you money. If you’re applying independent of your folks and with no income, expect your credit limit to be very small. It’s best to only use your card for emergencies and always pay your balance off on time.

Best Credit Cards for College Students Tips

Any of these types of best credit cards for college students can be a wonderful benefit. Many students use them to pay for books, meals, and cover emergency situations at school. But financial literacy is essential, as certain pitfalls have messed up the credit of many college students who were unaware.

1. Know when your Intro APR Rate changes. APR stands for Annual Percentage Rate. It is the interest that the credit card company charges you on top of your balance. For instance, if your APR is 20% and your balance is $1,000, then you’d pay $200 a year in interest, divided over 12 months, which is about an extra $16 a month. This is how the best credit cards make their money.

Many best credit cards for college students come with a very low introductory APR like 0%, which many last for 6 to 12 months. But after that, the APR usually jumps up to 13% to %20. That can lead to a lot of extra money you need to pay for over time. Don’t be caught by surprise, know exactly what your APR is and when it is going to change.

2. Stay Under Your Credit Limit. The main pitfall of best credit cards for college students, as we can see by the recent credit crisis, is spending beyond your means. In college, with costs always on the rise, this can be a big problem. If you only have a $300 credit limit, try to only spend $100 at a time if you can. If your parents have co-signed so that you have a big credit limit of a few thousand dollars, don’t look at it as a license to print money.

3. Always pay on time. Even if you can only pay the minimum payment, know the exact date of the month when it is due. Credit card companies make most of their money through late fees. Once you miss a payment you open yourself up for all kinds of penalties, both on your credit report and financially.

Previous Post: How to Pay for College

4. Make your goal to build credit, not buy things. The best advantage of best credit cards for college students is the ability to prove to future creditors that you are a responsible customer. When you’ve graduated and are looking to finance a car or get a mortgage on a house, they will be looking at how you conducted yourself during school.

If you use them responsibly, then best credit cards for college students can be a great part of your college experience and a stepping stone to the enjoyment of the full financial freedom of being an adult.

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