If you’re a college student and you’ve been bombarded with ads for student credit cards, you’re probably wondering what’s different about them. After all, student bank accounts offer substantial advantages in the form of low fees and free accounts. What about student credit cards is specially tailored to your needs?

The primary difference is that student credit cards are much more likely to approve you. Regular credit cards want assurance that you are a good credit risk: a long credit history, a certain level of income. When you have never had a credit card and you have a low paying college job, meeting the requirements of a regular credit card can be tough. However, student credit cards are designed to take this difficulty into account. Some require you to have a cosigner, usually a parent or guardian, whose own income is high enough to assure that the credit bills will be paid. Other credit card issuers allow you to sign for the card on your own. If a card you are considering requires a cosigner, take into account that the cosigner will have access to all the bills and will know what you buy with the account’s credit. If you don’t mind, then taking on a cosigner is the more secure choice. On the other hand, if you want your privacy, choose a card that doesn’t ask for a cosigner.

Student credit cards sweeten the deal by offering money back on purchases you charge to the card. Some cards offer as much as 20% back on online purchases made at certain retailers. That can be a substantial savings. Before you jump at the offer, double check to be certain you like to shop at the stores that are included in the money back offer.

The tradeoff for getting a credit card without a credit history is that the company covers the risk of taking on unproven creditors by slightly raising the interest rate on their student credit cards. Student credit cards generally have interest rates at least a few points above the going market rate. Compare as many offers as you can find, and put a lower interest rate first when choosing a credit card. Ignore promotional offers of a 0% percentage rate. That rate lasts only six months or so, and after that it bounces up to the much higher normal rate. A higher interest rate will result in increased monthly payments, but responsible use of your credit will reduce its impact. Keep a low balance and pay your bills on time religiously so that when you leave school and get a job, it will be easy to trade your student credit card for a regular card with a lower rate.

This entry was posted on Friday, July 17th, 2009 at 7:15 am and is filed under Credit cards for bad credit. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.