STUDENT CREDIT CARDS INFORMATION

Students are in their final few years before a career begins Ė a great time to start building up a credit report and making sure that when you do graduate you will be taken seriously by banks and lenders.

        

Student Credit Cards

What is a student credit card?

A student credit card is just like a standard credit card; however, it is designed specifically with students in mind. This means there are a few factors to consider when deciding which card to take out.

Unlike a standard credit card, a student credit card has a much more lenient application process. Students are not required to have a regular monthly income and their credit history is not taken into account when they apply for a student credit card. As a result, approval for student credit cards is easier for students; however, because they are considered to be high risk borrowers, the APR on the student credit card is likely to be higher than a standard credit card.

Student credit cards do, however, allow students to build their credit history so that they are in a better borrowing position when they leave college or high school. They also offer students the ability to borrow money if they find themselves in an emergency situation so you have security and safety in the knowledge that you are financial sound.

How can I apply for a student credit card?

You can apply for a student credit card in the same ways that you can apply for a standard credit card, however, the application process is usually much easier because your credit history is not paramount.

To obtain approval on a student credit card you usually need:

  • To be a student or studying full time.
  • Be a permanent Canadian resident
  • Have reached the age of majority in the province in which you live.

What risks should I look out for when I use a student credit card?

Due to the high APR which credit card providers apply to student credit cards is it even more important that you make the monthly repayments on time every month. If you do not keep on top of this then you will easily build up a lot of debt which will not only affect your credit history but also cause you a lot of stress and hard work. If you are not able to make the monthly repayments, you must at the very least ensure you pay the minimum monthly payment so that your credit history is not negatively affected.

Another important factor to consider when using a student credit card is you must not use your card to withdraw money from an ATM. You will most likely incur a withdrawal fee of up to 3% and the interest rate on cash withdrawals is considerably higher than purchases. It is always worth checking these fees and interest rates before you apply for a student credit card.

Is it a good idea to take out a student credit card to build my credit history?

Student credit cards are a great way for students to build their credit history if they are used responsibly and paid off in full every month. If you are able to ensure you pay off your student credit card every month, you could find that you credit history is positively affected and find your borrowing potential is greatly increased when you leave college and get a full time job. Student credit cards have a much lower credit limit than a standard credit card limit, making it much easier to stay out of debt and spend within your means. Just make sure you use your card responsibly and donít get tempted to go on spending frenzies.

Choosing the right student credit card

There are a variety of student credit cards on the market for you to choose from and each one should be researched carefully to ensure they are suitable for you. When researching which student credit card to take out, you must always check the APR as this is the interest that you will be paying on the money you borrow. What do you need the card for? If you card is for emergencies then you should also consider what the interest rates are for cash withdrawals or overseas spending. If you have a balance to transfer then you should look at the balance transfer APR. What is the credit limit on the student credit card? If you think that you might be tempted to go on a spending spree if could be worth thinking about choosing a student credit card with a lower credit limit so that you eliminate the temptation and donít find yourself in horrendous debt. If you think that you will be able to make the monthly repayments then it could be worth looking into the cash back or rewards on offer so that you can take advantage of these perks. Whatever you choose, you must ensure you read the credit agreement carefully and if you are in any doubt always seek financial advice.

Student Credit Cards: Always remember!

Credit cards, including student credit cards, are a risky financial product. Not only do they have high interest rates but if you donít clear your balance you can be hit by late payment charges - so make sure you stay on top of your finances.

        


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