If used correctly, a student credit card can prove to be quite a useful tool if you are pursuing further education. It can help you cover emergency expenses and pay for your online purchases. In this article, we take a look at how student credit cards work as well as their benefits. Continue reading to decide whether
a student credit card is right for you…
student credit card
What are student credit cards?
Student credit cards are designed for college and university students who have not yet built up a sizeable credit history and who therefore won’t qualify for standard credit cards.
How do student credit cards work?
Credit cards designed for students work in much the same way as standard credit cards, but credit limits are typically lower and interest rates are generally higher. This reflects the greater risk of non-payment, as perceived by the card providers. To qualify for a student credit card, you’ll need to be aged 18 or over, a UAE resident, have a student bank account with your chosen credit card provider and be registered on a course lasting for at least two years. Your student loan and any other income may also be taken into consideration.
What are the pros of getting a student credit card?
There are numerous reasons why student credit cards are so popular. Below are some of the major advantages:
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Earn Rewards
It’s true that many student credit cards offer you big rewards in the form of cashback from your purchases or free travel rewards. These things can help you to take trips and buy things you might not otherwise be able to afford.
For example, a credit card that offers 2% cashback essentially gives you a 2% coupon on everything you buy.
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Build Credit
Having a good credit score is important if you ever want to rent an apartment, open a utility account, take out a loan for a house or a car, or get a cell phone plan. It can affect whether you’re approved for a loan and how much interest you’ll pay.
An excellent credit score can save you thousands of dollars in interest payments in numerous situations such as over the course of a 30-year mortgage if you get a better interest rate because of your good score. Potential employers may also check your credit. In some cases, you might even be denied a job if your credit score is not high enough. Getting a student credit card and using it wisely can help you build your credit score so that it is in good shape by the time you graduate. That is because you will be adding positive information, such as on-time payments, onto your credit report, which can increase your credit score. In addition to that, the longer you have an open credit card on your account, the more your credit score can rise. The length of credit history variable is one of the hardest credit factors to manipulate.
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Get More Consumer Protections
One of the things people do not realize about credit cards is that they can actually protect you in many ways that debit cards, checkbooks, and cash cannot.
If someone steals your debit card info, they can drain your bank account in a heartbeat and there’s nothing you can do about it. In contrast, if someone steals your credit card info and uses it, you can have the charges removed.
Also, it is easier to get your money back if you buy something but the merchant charges you the wrong amount. You can call your credit card company and they will fix it. With a debit card, once it’s gone, it’s gone.
Tips to help you manage your student credit card
Here are a few tips and tricks that will help you manage your student credit card:
- If you plan to use a student credit card when you’re at university or college, it’s important to manage it sensibly. This means you should only ever spend what you can afford to pay back and only use your card for essential purchases.
- It’s also important to pay on time each month – doing so will help to improve your credit score and show lenders you are a responsible borrower. To help you remember to pay on time, you can set up a monthly direct debit.
- Try to pay off the balance in full each month as you’ll clear your debt faster and pay less interest. If you can’t afford to, be sure to make at least the minimum monthly payment so that you avoid penalty fees and damaging your credit score.
- Finally, if you use your card responsibly, you may find you are offered a higher credit limit after several months. Don’t feel pressured to accept this if you think you’ll be encouraged to spend more than you can afford to pay back.
What happens to your student credit card once you graduate?
After you graduate, you will still be able to use your student credit card. However, if you have used your card carefully, it’s likely you will qualify for more competitive credit cards that offer benefits such as interest-free purchases, cashback, or other rewards. Of course, it has its own disadvantages as well. So, if you’re not sure whether a student credit card is right for you, you could consider an interest-free overdraft instead.
