How are student cards different from other credit cards?
Quick insights
- Student credit cards are designed for individuals with limited or no credit history and may offer more lenient approval criteria than regular credit cards.
- Some student card differences include lower credit limits, a focus on credit building and tailored rewards or educational resources.
- The student card approval process typically considers enrollment status and income, rather than an extensive credit history.
For many young adults, a credit card represents a significant step toward financial independence. However, not all credit cards are created equally. This article will explore some ways a student credit card differs from a regular credit card.
What is a student credit card?
A student credit card is a financial product tailored for individuals enrolled in higher education. Its primary purpose is to help new borrowers establish a credit history, a record of how you manage borrowed money. Unlike traditional credit cards, student cards often have more flexible approval criteria, recognizing that students may have limited or no prior credit experience.
Consistent, on-time payments are important to building a positive credit score. Student credit cards typically feature lower credit limits to encourage responsible spending and helps reduce the risk of excessive debt, serving as a tool for learning financial responsibility.
Key differences: Student credit card vs. regular credit card
While both student and regular credit cards provide a line of credit, there are some student card differences that set them apart.
Eligibility and approval
An important student card difference lies in the eligibility and student card approval process, as regular credit cards typically require an established credit history and steady income, which can be a barrier for young adults. Student credit cards are designed for individuals with little to no credit history, with lenders considering factors beyond a traditional credit score, such as:
- Enrollment status: Proof of enrollment in an accredited college or university.
- Age: Applicants must be at least 18. If under 21, proof of independent income or a co-signer will be required.
- Income: Income from part-time work, scholarships, grants or allowances can be considered.
Credit limits
Another notable distinction between student credit cards and regular cards is the credit limit. Student credit cards typically come with lower credit limits; these lower limits help encourage responsible credit card usage and may make it easier for students to pay off their balances in full each month, which is beneficial for building a positive credit history.
Rewards and benefits
While some credit cards offer extensive rewards, student credit cards often have more modest offerings, focusing primarily on credit building. However, many some student cards offer benefits tailored to students:
- Cash back: Some student credit cards offer flat-rate cash back or bonus cash back in relevant categories.
- Good grades rewards: This is a perk on some cards for maintaining a certain GPA.
- Low annual fee: Many student credit cards come with low annual fees.
- Educational resources: Some issuers provide tools to help students understand credit scores, budgeting and responsible credit use.
Fees and interest rates
Student credit cards are generally accessible in terms of fees, with many having a low annual fee. However, like all credit cards, they will have annual interest rates (APRs) on purchases. Student credit card interest rates can sometimes be higher than some regular credit cards, reflecting the higher risk of new borrowers. Paying the balance in full each month may help to avoid interest charges. Other fees, such as late payment or foreign transaction fees, are similar to those on regular credit cards.
Applying for a student credit card
Applying for a student credit card involves a few steps. First, you may want to research different student credit cards to find one that aligns with your needs. Next, gather necessary documents, typically including: government-issued ID, Social Security number, proof of enrollment and proof of income. You can usually apply online, over the phone or in person.
Transitioning after graduation
What happens to your student credit card once you graduate? This varies by issuer. Generally, if the account remains open and in good standing, it continues to remain active. Some issuers may automatically reclassify your account after graduation, potentially upgrading you to a regular (non-student) version of the card. This upgrade might include a higher credit limit, better rewards or additional perks. You may be asked to update personal information like your graduation date and income.
Keeping your student card open and active may be beneficial, as it preserves your credit age, a factor in your credit score. Closing your oldest credit account could negatively impact your credit history.
The bottom line
Understanding the main differences between student and regular credit cards is a step towards making an informed financial decision. For students, these cards offer an opportunity to help build a positive credit history and learn responsible ways to manage your money. By using a student credit card wisely, paying bills on time and keeping balances low, you can begin to lay a foundation for your financial future, paving the way for better financial products and opportunities down the road.
