The way in which you plan to use your new credit card is an important point to consider when choosing a student card.
Do you plan to use it to spread out payments on car insurance or the cost of textbooks? Will you use it for daily purchases of gas and supplies and entertainment?
Picking a Rewards or Bonus Offer
Credit card lenders compete with each other with the rewards and bonuses they offer to those signing up for new accounts. The 0% introductory interest rate is popular with students and can be a great option for someone learning to use credit.
However, as you compare student cards, make sure to look at the Annual Percentage Rate (APR) that will take effect when the six months of 0% percent ends.
The “good student” rewards program is gaining popularity. Most of these offers provide a reduction in interest rate or cash back bonuses for academically talented students who handle credit in a responsible way. For parents, this is an excellent incentive for good grades.
Choose a Recognized Lending Institution
Young people don’t like to be embarrassed and little is as embarrassing as presenting a credit card and being told “we don’t take that card”. This can happen if you obtain a student credit card from a small or regional lender.
So, when you compare credit card offers, make sure to look for a lender with a recognized name in the credit industry.
It should be a credit card that carries the MasterCard or Visa logo. That will ensure your card will be accepted for payment almost anywhere.
One purpose of a student credit card account is that it allows you to begin building a credit rating with the major credit reporting agencies. This is another reason to use a recognized credit issuer as you can be guaranteed they do report monthly to credit bureaus.
Your first purchase with a student card will begin building a credit file for you even though you are still in school. This is a real opportunity for students to establish credit by building a file of good credit that will never leave them turned down for credit due to lack of credit history.
Compare Interest Rates and Fees
Interest rates are only part of the costs that can be part of a credit card account. However, the interest charged is important as the interest costs are money you pay for the privilege of using credit.
If you have a student credit card with a high interest rate the interest you pay for one year on a $300 balance can be $100. That is one-third of the debt you owe.
Would you buy that shirt on sale for $20 if you knew it would cost you $30 by the time you paid it off? That is what interest can do and those interest charges are one reason it’s important to carefully consider all credit purchases.
Fees are another component of a student credit card. If you charge more than the spending limit attached to your account, you will be charged a fee. This may be as high as $39. If you pay your monthly bill even one day late, you will be charged a late fee of up to $39.
Most lenders today have a grace period that applies to the credit accounts. The grace period is the time between buying an item with the credit card and being charged interest for that purchase.
The best grace period is 25 days but some lenders now limit this to 20 days. Either option is acceptable. This provides the student with about three weeks after buying an item to pay that amount and avoid interest charges. It’s also important if you buy an item and return it for credit.
Avoid applying for a student credit card that does not have a grace period. With such an account you begin paying interest on a purchase the day after you buy the product.
This is a predatory lending practice that can lead to interest charged for something purchased and returned to the store a few days later. The credit card user can end up paying dollars for a purchase that was reversed.
Read the Fine Print
The small print on applications tells you the exact terms of the credit account you are applying for. It is boring to read and seems overly filled with legalese. However, it is very important to look at the terms before agreeing to them. If you find terms that are not acceptable, move on.
Fees and hidden terms are why you should always compare various credit card offers before you apply. Learning to choose a student credit card that is right for the way you live should be your goal. You don’t have to settle for less.