Should I Get a Student Credit Card? (2024)

If you are enrolled in school, you may wonder if you should get a student credit card. Student credit cards are easier to get than other cards, and they can offer advantages like providing a convenient way to pay for purchases as you build credit. However they do have downsides to consider.

Learn about the advantages and disadvantages of getting a student credit card so you can determine if it's right for you.

What Is a Student Credit Card?

A student credit card works just like any other credit card, but it's designed for younger adults with little credit history. It provides the convenience of a credit card, making it handy for making purchases, especially with online shopping, while also helping you build a credit history and a good credit score. These cards usually carry a lower credit limit and higher interest rate.

To obtain a student credit card, the applicant typically must:

• Be at least 18 years old
• Be a U.S. citizen or have a Social Security Number
• Be enrolled either full-time or part-time at a qualifying school
• Have some form of income or have someone to co-sign the application
• Not already have bad credit

Student credit cards generally have lower credit lines and a cap on how much a student can spend on the card to minimize the risk to the lender. This smaller limit can make it easier for the student repay the balance or make the minimum monthly payments.

The Upsides of Student Credit Cards

A student credit card can be beneficial in a number of ways, such as helping you build credit, providing emergency funds, and potentially offering rewards.

Builds Credit

When you use a student credit card, the issuer will report your account activity to the major credit bureaus. The credit reports that the credit bureaus compile on you become the basis for determining your credit score.

Lenders use your credit score to assess how financially responsible you are and how big of a risk you may be. Many of life's major milestones, like buying a car or getting a mortgage for a new home, become easier with a higher credit score.

By paying your credit card bills on time and keeping your credit utilization ratio relatively low, you can build and maintain a good score. But if you fail to make your payments on time and regularly run up charges on your account, your credit score will fall. Credit scores typically range from 300 to 850, with "good" credit scores starting at 670.

Emergency Funds

Ideally, an emergency fund would include three to six months' worth of expenses in cash. Younger adults who may not have built an emergency fund yet may need to rely on a credit card to cover unexpected expenses like a car repair.

Potential Rewards

Like many credit cards on the market today, student credit cards often come with additional benefits. While regular cards often offer rewards in the form of cash back or travel miles, student cards are more likely to offer perks like a free year of Amazon Prime or discounts at a major book retailer.

The Downsides of Student Credit Cards

Student credit cards also have some potential downsides, such as their smaller credit limit and higher interest rate. You may face annual fees with these cards as well.

Lower Credit Limits

The typical credit limit on a student credit card is much lower than on a traditional credit cards, often just a couple hundred dollars. While that can keep you from charging too much, it also limits the card's usefulness in a costly emergency.

Regular expenses that students face, like books, groceries, and other necessities, can also add up quickly if they're charged to the card, and can quickly drive up your credit utilization ratio.

Higher Interest Rates

Student credit cards have variable interest rates that can be on the high side. Many charge in excess of 20%. That won't affect you if you pay your credit card bill in full each month, but it can be costly if you don't.

Additional Fees

More often than not, student credit cards carry fees like an annual fee, foreign transaction fees, and late payment fees, among others. By shopping around, however, you may find a card with few or relatively low fees.

Risks

Even though you can't run up a huge balance with a student credit card, it's still possible to damage your credit if you miss payments. So plan to pay at least the minimum due each month and ideally your entire balance. Also monitor your credit utilization ratio, so it doesn't get too high and drag down your score.

Shopping for a Student Credit Card

Student credit cards are widely available from the same banks that issue regular credit cards. To help you find one that's a good fit for your needs, Investopedia evaluates student credit cards and publishes a regularly updated list of the best student credit cards on the market.

Note that if you don't qualify for a student credit card, another option is a secured credit card. With a secured credit card, you deposit a sum of money, which becomes your credit line.

After you have used your secured card for a while—and made all your monthly payments on time—you may qualify for an unsecured credit card. Like student credit cards, secured cards will report your account activity to the major credit bureaus, allowing you to build a good credit history and respectable credit score. Investopedia also publishes a list of the best secured credit cards.

The Bottom Line

Student credit cards can provide significant benefits to young adults who have little credit history. If used responsibly, they can help you build credit and provide a convenient payment method. If you're considering getting a student credit card, shop around and compare rates and terms.