For many young adults, the future benefits of establishing good credit may seem impossibly far away, just like turning 30 or attending parent-teacher conferences for kids you haven’t even thought of having. But there’s a big payoff in the near term for having good credit, too, such as perks-laden credit cards with high points bonuses and reward structures.
A student credit card is a good place to start building your credit, both for now and for later. But there are a few questions you should know the answers to first:
1. Do I have to be a student when applying for a student credit card?
There are a few exceptions to this rule, but most times, you do need to be a student to qualify for a student credit card. Applications for student cards generally include space to fill in school information, and applying for a student-only credit card as a non-student may result in a hard pull on your credit report for nothing. If you’re a non-student considering a student card, be sure to check the card’s eligibility requirements before applying.
2. Will I need a cosigner?
When you have little to no credit history, it’s not uncommon for an issuer to ask for a cosigner before approving you for a credit card. A cosigner is someone with a more established credit history to share responsibility for the card. Usually a family member or close friend, a cosigner is equally liable for any debt the principal cardholder may rack up. This makes using your card responsibly that much more important.
3. Am I making a wise choice for my financial future?
Building credit early means being prepared down the road when having good credit can mean lower rates on auto loans, mortgages and wide variety of credit cards. College is routinely likened to “training for the real world,” and student credits cards can be understood in a similar vein. You’re probably not going to use a student credit card to make major purchases, but simply using and paying off your card will build your credit.
4. What if I get into trouble with the card?
Applying for a student credit card is often your first step in building a credit history, but where that path leads depends on the choices you make. Negative information can stay on your credit report for seven years in most cases, so acting irresponsibly with credit means limiting and sometimes eliminating many credit options for lengthy periods of time. It’s always easier to get things right from the start than have to dig yourself out of a hole later on. Here are a few things to keep in mind:
Always pay your bill on time and in full. Paying your credit card bill on time and in full every month will not only build good credit, but also save you money on fees and interest. Doing this depends on using the card responsibly in the first place, so make sure you’re always spending within your means.
Create a budget: It’s easier to stay within your means if you have an idea of what you should be spending each month. Having a budget helps limit unnecessary expenses and can prevent you from being burdened with a unexpectedly large balance when your bill comes around.
Set up account alerts: Having an issuer send payment alerts is the easiest way to avoid a late payment. Whether you receive alerts by text or email, knowing you have a bill coming due will always make it easier to remember to actually pay it, and making payments on time will really help your credit score.
5. Will using a student card lead to better cards?
Often lacking rewards, sign-up bonuses, and other perks, student cards are usually not the most exciting credit cards available, but they’re not really supposed to be. The whole point of a student credit card is to ease new borrowers into responsibly using and managing small amounts of credit. Starting simple makes it easier to focus on paying off your bills on time, spending within your means and moving on to cards that offer better points and rewards on spending. Having good credit can often lead to better rates on things like auto loans and mortgages, too.
Student credit cards aren’t for everyone, but the mentality behind them is universal. Establishing good credit habits early means carrying those habits later into life, and usually saving money, too.
Kevin Cash is a staff writer for NerdWallet, a personal finance website. Email: [email protected].
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