The Pros and Cons of Having a Student Credit Card

If you’re off to a university for the first time, the question of a credit card may have come up—specifically the question of a student credit card

What’s the difference? Student credit cards with financial education and resources, additional support from your credit card issuer like alerts and reminders, and student-oriented rewards. Sometimes those rewards—like a percentage back at gas stations, restaurants, and other retailers—are based on good grades in addition to using the card correctly.

So: why should you consider a student credit card? Let’s take a look at some pros and cons.

Pros

1. Build good credit

After you graduate, or maybe even while you’re a student, you might want to buy a car, rent an apartment, or buy a house. These types of large transactions usually require a credit check, in which a lender assess your creditworthiness by checking with these reporting agencies.

A strong credit report works in your favor to get the loans you may want or need—and sometimes they affect your ability to get that apartment that you want. Why? Landlords want tenants who pay their bills promptly.

If you can use your credit card wisely and not carry too much debt, it might be just the thing to begin your excellent credit history.

2. Emergency use

Have an accident? End up in the ER? Need to buy a new computer? Need to fly home suddenly? Having a student credit card offers you a small cushion in the case of eventualities that you can’t control.

You can pay for something immediately if you need to, and provided that you pay it back on time every month, it won’t have a negative affect on your credit.

3. Track your spending

If you’re not quite financially independent and need some help figuring out how to spend money—or where your spent money goes, a student credit card may help you learn to track your spending. How? Every purchase is tracked—you can log onto your account and check out what you’ve spent over time. Another nice feature? Most student credit cards allow parents or guardians to log on, too.

Cons

1. Complicated interest rates

Interest rates can be tough to understand. Some credit cards charge upwards of 20 percent interest, so not paying your bill on time leads to paying a lot of interest.

Here’s an example. If you have $2,000 worth of debt and 20 percent interest, you’ll pay $40 per month for five years and spend nearly $1,000 in interest charges.

Know what you’re paying, when, and why—and if you don’t understand it, ask someone whom you trust to explain it to you. You—and your wallet—will be grateful.

2. Control your spending

Having a credit card is like having access to cash that you don’t exactly have on hand—on hand. One swipe and you’ve spent money you don’t technically have.

This can be problematic if you can’t control your spending.

The key? Don’t spend more than you can afford. Put another way: if you can’t afford to pay it back, don’t spend it.

If you feel like you might easily swipe your credit card for purchases that you don’t really need, with no real way of paying your bill, you may want to reconsider getting a student credit card.

3. Affects your credit history

For better (see Pros #1), or for worse. Your goal of building a solid credit history requires that you pay your bills on time and that you don’t overspend. If you can’t do those things, your credit score will be affected negatively.

If you have a poor credit score, you can jeopardize your chances of getting a mortgage, a car loan, that apartment you want, or any other large purchase. Think before you spend—if you can’t, then think again.

So, what should you do? Make a wise decision, and one that suits you right now. If you’re a student who can accept the responsibility of a credit card, go for it. If you’re not sure you’re ready, consider waiting.

A few tips? Read the fine print. Check out the payment plans. Know what you’re buying—check the interest rates. And please: get only one card.