Find Out If You Should Get a Students Credit Card Or Not?

Do most students ponder whether they need to have a credit card in their name while they’re still studying? Some would say that it’s an excellent way to build your credit history over time and get redeemable reward points or cashback while using a credit card for students.

In addition, having a credit history is essential when it’s time to apply for your first car or home loan, as a decent credit score helps you fetch a competitive interest rate at attractive terms. If you cannot decide which credit card works best for you, ask yourself whether you’re a careful spender or have unhealthy credit card management habits.

On the one hand, if used with care, a credit card gives you an excellent financial start compared to others without a credit card, while on the downside, it carries higher interest rates. So does this mean you should avoid taking a credit card for students? Not really but, it’s prudent to assess the need for a student credit card and then make an informed decision.

Pre-requisites for obtaining a credit card for students:

• Should be 18 years or more
• Be an Indian citizen
• Should be an existing student in a college or school
• No negative pre-existing credit history
• Should have some form of independent income, and if not then, have another person co-sign the credit card application

Advantages of student credit cards: 

• Building credit history:

  1. All account activities are tracked and reported to major credit bureaus. So, if you have no other credit accounts, then a student credit card helps initiate your credit journey.
  2. Settling monthly credit payments on time enables you to start building a positive repayment history and a decent credit score.
  3. In contrast, if there is a delay in making monthly payments, it adversely impacts your credit score.
  4. A good credit score is helpful while applying for a loan – home, car, two-wheeler, or a smartphone, as it affects and helps determine the interest rate.

• Earn benefits and rewards:

  1. Free travel rewards
  2. Cash backs on using credit cards at empaneled stores
  3. Free OTT subscription
  4. Discounts at popular student book stores

• Helps in financial literacy and planning:

  Using a credit card teaches you to use and manage debt wisely. In addition, since the late payment penalty on repayment is relatively high, using a credit card teaches one to plan and prioritize expenditures accordingly.

• Flexibility:

  It comes in handy in emergencies where a large amount needs to be paid at short notice.

• Better and safer than carrying a cash or debit card.
• In cases of theft or fraudulent transactions, you can contact the credit card company to reverse the erroneous charges.

Disadvantages of student credit cards:

• Potential Debt Trap:

  If payments on the credit card are not made on time, it leads to a massive pile of debt while harming the credit score. Considering a student’s income isn’t adequate enough to cover significant expenses made on a credit card and an applicant only manages to pay the minimum amount, it leaves him into the debt trap, which can get challenging to settle.

• High-interest rates:

  Student credit cards carry a higher interest rate than other credit cards. It would not matter if repayments are made on time but can become a burden if not done within the stipulated timeframe.

• Low credit limits:

  Compared to other credit cards having a higher limit, the permissible limit on credit cards for students is relatively lower. Though it does prevent the student from going overboard on the card, it’s not a viable proposition in emergencies where a large amount is required instantly.

• Extra or hidden fees:

  like most credit cards, one has to read the fine print carefully and keep in mind the following before taking a student credit card:

  1. annual fees to keep the card active
  2. foreign transaction fees
  3. late payment fees

• Can negatively impact credit score:

  Late payments or non-payment can dip the credit score. Since they are easily tracked, it shows up when a credit history check is done, which is mandatory before taking any loan in the future.

Final Thought:

Credit cards for students can be used at most places today like other credit cards and work the same way. By weighing the pros and cons and considering all the terms and conditions, you may be able to decide which student credit card to take. But if you do not have a way to make the monthly payments on time, don’t take a student credit card. Maybe start with an add-on card with parents or another person to learn financial discipline first and then take on a student credit card in your name.