A student credit card is a variant of a payment card designed for young adults pursuing their studies. Offering this line of credit to students is intended to promote financial freedom and help these individuals learn money management from an early age. These specialised credit cards provide a comfortable way to make transactions while students begin to build their credit profiles.
The flip side to this line of credit is its wrongful usage. If these cards are used improperly, it can cause the card user harm in the long run. Before getting your own student credit card, you should know about its usability and the benefits you can get from the card, and you should also be aware of the right way to use it.
Below are some of the advantages of availing these cards.
Benefits of a Student Credit Card
A student credit card can help you in various ways. Some of them are mentioned below:
- Provides Emergency Fund
An emergency fund typically includes 3-6 months of expenses in cash. But young adults, who generally do not have or may not have built that emergency fund, can rely on this credit card to bail them out in such scenarios.
- Builds a Credit Profile
A credit score, when maintained properly, can provide a number of benefits, and with a credit card for students, you can start early on this path. Since credit score determines your credibility as a borrower, you need to ensure that you are maintaining it properly.
A high credit score makes it easier to take loans for different purposes. You can maintain a good credit profile by repaying your credit bills on time and keeping the credit utilisation ratio on the lower side, failing which, your credit profile and credit score may suffer.
- Offers Rewards
Like any other credit card, these specific ones also come with additional perks that students look for. Usually, credit cards offer instant discounts, travel miles and reward points. Student credit cards offer all these extra student benefits, like discounts on a big book retailer or free 1-year subscriptions on online learning platforms. These additional benefits are the reason behind the immense popularity that student credit cards enjoy within the community. Furthermore, money-back credit cards for students earn them cashback on transactions.
- Allows You to Track Your Spending
If you are not financially independent yet and want to learn about financial management, using a credit card is a great idea. These payment cards have detailed account statements available at the end of each billing cycle, which you can use to log in to your account and learn more simply. Based on this, you can manage your spending and eradicate unnecessary purchases.
These are some of the advantages that credit cards for students have to offer to their users. There are downsides to these credit cards, but if you know how to manage your finances smartly, you can easily avoid all the risks and enjoy the perks of having a student credit card.
How to Use a Student Credit Card Correctly?
Before applying for a student credit card, you should know about the correct ways of using it to avoid risks that may arise. Here are some key points emphasising the correct ways to use a student credit card:
- Keep the Credit Utilisation Ratio Low
As a responsible cardholder, getting too close to your credit limit can be considered unhealthy even after paying your bill every month. Also, the user’s credit score gets affected. Your credit utilisation ratio, the percentage of the total available credit you use, should be below 30%. You can set up balance alerts and track your expenses to avoid exceeding the 30% threshold.
- Pay the Credit Card Bill Timely
Credit cards can be useful in building a good credit profile. Failure to make credit card bill payments on time can harm your credit score. A good payment history is crucial in maintaining a decent credit profile. Hence, you need to pay the credit bills within your due date to avoid any negative effect on your credit profile.
- Don’t Overspend
Falling into credit card debt is easy. Students with less idea about these credit cards’ usability can be deceived. Credit cards are a very alluring option as you can pay for everything you buy later. It is essential to remember that with high-interest rates, carrying a balance every month can pile up into a huge amount that is difficult to get out of. Do not spend more than you can pay back in a month.
- Don’t Go for Multiple Cards
Having more than one credit card is a tempting option. Too many cards can lead to a hard credit inquiry that may affect your credit score. Multiple cards can make you lose track of your expenses, and you may skip your payment due dates.
Conclusion
A student credit card benefits students desiring financial independence if used judiciously. It can make you financially independent by giving you the responsibility to maintain the card without falling into debt. By helping build a good credit profile, these cards are a big help for the future.