Before applying for a student credit card, it’s important to carefully evaluate your options. Here are some questions to ask yourself:
- Is a credit card right for you? If you miss payments or default, it can take a long time to repair your credit.
- Do you understand the implications? If you feel unsure about credit and credit cards, take the time to learn more before applying.
- Do you value convenience or maximizing benefits? Some cards offer easy-to-manage flat-rate rewards, while others have rotating categories with higher rewards but more complexity. Consider if you want an introductory rewards program or ongoing rewards with substantial payouts.
- Which card matches your spending habits? Think about the types of purchases you make regularly to find the card that fits your needs.
Annual Fees
Many credit cards come with an annual fee. While these cards often offer better rewards, larger bonuses, and additional perks, it’s essential to determine if the benefits justify the fee. Ask yourself: Will the rewards or perks cover the annual fee and provide more value than a card with no fee?
Keep in mind that an annual fee is deducted from your available credit, which can be problematic for students with limited credit. For example, if your credit limit is $300 and the annual fee is $95, your available credit is reduced to $205. This reduction can add up, especially if you’re trying to keep your credit usage low.
It's important to maintain a low credit utilization ratio, ideally below 30%. For example, with a $300 limit, it’s best to keep your balance under $100. If possible, pay off your balance in full every month to help improve your credit score.
Payment Terms and Interest Rates
Consider the interest rate on balance transfers and the card’s APR. Carefully read the terms and conditions to understand all fees associated with the card, including recurring costs, transfer fees, cash advance fees, international transaction fees, late payment fees, and returned payment fees.
Be cautious about other less common fees, such as account maintenance fees, extra card fees, or application fees.
Credit Reporting
Student credit cards can help you build good credit, but only if the card issuer reports to the three major credit bureaus. Look for a card issuer that reports to all three agencies to ensure your responsible card use positively impacts your credit report. Improved credit can help you secure better loan terms and future credit card offers.
Rewards Programs
Many student credit cards offer rewards like cash back or points. While the rewards may not be as high as those on premium cards, they are usually better than those offered by secured cards or other credit-building options.
Security Deposits
Most student credit cards are unsecured, meaning you don’t need to provide a security deposit. However, secured credit cards are also available, which require a deposit that acts as your credit limit. If you're concerned about spending too much upfront, secured cards could be a good option, as they give you a chance to build credit with less financial risk.
International Transaction Fees and Global Acceptance
Planning to travel abroad? Before using your card internationally, make sure it’s widely accepted and doesn’t carry additional fees. Cards with Visa or Mastercard are generally accepted globally, while Discover may not be as widely accepted.
Most credit cards charge a foreign transaction fee of 1% to 3%. However, certain travel-focused cards, such as the Bank of America® Travel Rewards Credit Card for Students, offer no foreign transaction fees, which can help you save while traveling.
Conclusion
Choosing the right student credit card requires careful consideration of factors like annual fees, payment terms, rewards, credit reporting, and international transaction fees. By aligning your card choice with your spending habits and financial goals, you can make the most of your credit card and start building a strong credit history.