Heading to university or college brings a lot of change. Venturing into adulthood, means living alone, and that means increased financial responsibility. For students, this is a good time to start developing your credit and understanding responsible spending habits. Getting approved for a credit card may be easier said than done, which is why student credit cards are a good option.

Getting a student credit card is a major step, a powerful financial tool that should be used with maturity. While college/university students may find it harder to be approved for a regular credit card, financial lenders are actively seeking customers for student credit cards.

There are many enticing reasons to get a student credit card (building credit, learning financial responsibility, increasing purchasing power, etc.), but there are some things worth knowing before signing up for any card.

• What is a student credit card?
• Why should you get a student credit card?
• Types of student credit cards
• How to get a student credit card
• Tips on using a student credit card

Step 1: What is a student credit card?

Many young adults may have previously tried to sign up for a traditional credit card and found they were not accepted. That’s because most reputable lenders will not allow you to take credit without a previous history of good financial management. Of course, this leaves an obvious problem: How can you build a good record without having access to credit?

For people attending college or university, the answer could be a student credit card. Excellent for building credit if used responsibly, student credit cards feature reduced (sometimes none) income requirements and have no annual fees.

Step 2: Why should you get a student credit card?

Perhaps the most compelling reason to sign up for a student credit card is because they provide an excellent tool for establishing a good credit history. It is understandable that parents and students may be concerned about debt and interest payments, but if used responsibly student credit cards help young adults’ transition into financial independence.

A good credit score makes it easier to be approved for financial services such as loans, good interest rates, rental applications, etc.

Of course, managing a student credit card successfully can mean a path to future financial stability, but there are also dangers. A mismanaged credit card can lead to costly interest charges and a poor credit score. Parental concerns over student credit are legitimate, which is why it is critical that students understand their responsibilities and ability to pay at the end of billing cycles.

Step 3: Understand the types of student credit cards

Credit lenders in Canada offer specific types of student credit card, a prepaid credit card, secured credit card, and unsecured credit card.

• Prepaid Cards: What’s interesting about these cards is that they work more like a debit card, only allowing the user to spend what they have. Cardholders must pay the full balance upfront and that payment is the amount they will have to spend. It is worth noting a prepaid card does not help towards building credit.
• Secured Cards: Like a prepaid card, a secured credit card also works from an upfront balance being added to it. However, it also adds a monthly interest charge and can be used to build credit.
• Unsecured Cards: Most students will be familiar with the unsecured credit card because it is the traditional example. No deposit or upfront balance payment is needed. Instead, the financial lender supplies a line of credit, with minimum payments each month that are typically one or two percent of the balance.

Step 4: Get a student credit card

Lenders will often set up advertising booths at open day or during the first week of school. They will offer on-the-spot applications for student credit cards and will even throw in some enticing bonuses, such as prize draw participation.

While these added perks are interesting, they absolutely should not be your reason for getting a credit card. As in purchasing all financial products, the easiest way to find best solutions and deals is to shop around.

An online resource like RateSupermarket.ca provides a comparison between Canada’s leading student credit card lenders, allowing you to make an informed choice on which is best for you and apply directly online.

Basic tips on using a student credit card

• Build credit and avoid debt by paying off your balance during every single billing cycle (each month).
• It’s best to stay away from cash advance benefits. While it is enticing to receive cash instantly, cash advances override grace periods meaning you will pay interest immediately.
• Student credit cards are not a ticket to a consequence free spending spree. Only spend what you can afford to pay off each month.
• Avoid being enticed by rewards credit cards that you won’t benefit from. For example, travel rewards cards offer interesting benefits, but are pointless if you are not going to go on vacation.
• Don’t be blinded by perk offers that come with a credit card, such as a free gym membership for three months or entry into a prize draw.
• Shop around for the best student credit cards on the market and never opt for the first card that is offered to you.
• Research lenders and understand which offer the specifics you need from a credit card.
• Don’t always take the highest limit available – instead choose a credit limit that you can comfortably pay off each month.

Credit cards are a financial tool that need to be treated with respect and care. Always pay off your balance each month, and get used to using only what you need and can afford. If you do that, you set yourself up early with a strong credit score and good financial habits that can help you have a successful financial future.