Best Credit Cards for Students

February 6, 2018

"Nothing can be compared to the joy of financial independence" Said by Tung from Tiendayvi.com. When you are financially independent, you have enough income to pay for your living expenses without depending on someone else.

The sad news is that not everyone attains financial independence. Attaining financial independence is not an event. It is a process that requires discipline and commitment over a long time. Without discipline and dedication, financial independence is beyond your reach.

One way to train yourself to be financially disciplined from a teenage age is to get a student credit card. Access to a credit card also helps a student build a credit history and a good credit score.

What is a credit card? What is a student credit card? What are the best credit cards for students? You've landed at the right place. Stick with us till the end.

What is a credit card?

A credit card is a pocket-sized rectangular piece of laminated plastic. They are issued by financial institutions to allow you to purchase goods and pay for services by borrowing money up to a pre-determined limit.

Credit cards are issued with the condition that the cardholder will pay back the borrowed money, plus any applicable interest. The cardholder is also obliged to pay any agreed-upon additional charges as and when they fall due. Like most loans, the amount you pay increases depending on how long you take to pay the loan.

Each cardholder has a credit limit. A credit limit is the maximum amount of money you can borrow. The credit limit is set by the issuing company depending on a cardholder's credit history and credit score. Cardholders with a good credit history and a higher credit score will enjoy a higher credit limit. A bad credit history and low credit score will greatly hurt your credit limit.

How do credit cards work? A credit card can only be used where the service merchant accepts credit cards as a way of payment. Depending on the design, a credit card can either be tapped or swiped over a merchant's credit card reader. For online purchases, you have to manually input the card numbers on the seller's platform.

Swiping or tapping your card initiates a series of communication between the retailer, the card issuer, and the payment network. The retailer sends your card information to the payment network and a message to the card issuer, asking for authorization. The card issuer checks to be sure that you are still within your credit limit. If you are within your limit, the card issuer will give the authorization.

What is a student credit card?

Many students are yet to build up a good credit history. They are therefore not eligible for standard credit cards. Student credit cards are designed to serve these students.

Student credit cards work the same way as standard credit cards. The major difference is that student credit cards have a lower credit limit. Due to the high risk of non-payment, these cards charge a higher interest than standard credit cards.

What are the pros and cons of a student credit card?

Let's take a look at some of the pros and cons of student credit cards.

Pros

  • Build a good credit history: A student credit card can help improve your credit score if used sensibly. You have to commit to making the minimum monthly payments on time to establish a good credit history.
  • Emergency use: Eventualities will always happen. You might get involved in an accident, lose your computer or fall ill. This is where a student credit card comes in handy.

Cons

  • Higher interest rates: The interest rates charged by student credit cards are not only exorbitant, but they are also complicated and difficult to understand. Student credit cards have high-interest rates because the risk of default is very high.
  • Expensive fees: A fee is charged when you use your card for cash withdrawals. Additionally, interest is charged as well from the date of the transaction.
  • Missed payments can affect your credit score: Student credit cards require a high level of financial discipline. If you fail to pay your bills on time, your credit history will be negatively affected.

What things do you need to consider when applying for a credit card?

Below is a checklist of some of the things you should consider when applying for a credit card.

  • Minimum repayment: The minimum repayment is the amount of money you'll be required to pay if you fail to pay the balance due monthly. It may be expressed as a percentage of the amount due or stated as a lump sum figure.
  • Annual fees: Some credit cards charge a fee each year of use. Compare the fees charged by different student credit cards and go with the least.
  • Charges: Apart from the interest, credit cards also carry other charges. The charges are usually spelled out in the credit agreement. The charges may be for late payment or for going over your credit limit.
  • Loyalty points: Loyalty points are earned the more you use your card to make purchases. Check the terms and conditions are earned and how you can use them.

What are the best student credit cards?

What are the requirements for applying for a student credit card? Student credit cards don't require that you have a good credit history or credit score to be eligible to apply. However, some proof of financial experience and responsibility is required.

How do you tell that a student credit card is good? The definition of good is vague. Generally, a good student credit card will have the following features:

  • Relaxed eligibility requirements
  • Loyalty points
  • A cashback rewards program
  • A 'favorable' Annual Percentage Rate
  • Lower credit limits.
  • No-penalty Annual Percentage Rates

Based on the above criterion, the following emerged as the best student credit cards:

Discover it Student Chrome

This student credit card is widely praised for its lenient terms for first-time credit cardholders. It boasts of good cashback and loyalty reward programs. The card does not have an exorbitant penalty Annual Percentage Rate.

Deserve Edu Credit Card

Offered by MasterCard, this student credit card prides itself as an alternative to commercial banks and credit card issuers. This card offers a 1% cashback on all purchases. Additionally, it has a comparatively lower late payment fee. To sum it up, it has a flat APR.