Student credit cards are offered to university and college students and allow them to build credit history. The funds can be used to pay everyday expenses, school supplies, textbooks, books, bills, grocery, and more. Young people can choose from Visa, MasterCard, and American Express. There are many products for Canadians like the MBNA University of Western Ontario MasterCard, Visa Desjardins for Students Only, and ScotiaBank L’earn VISA.
Benefits to Consider
One of the main benefits is that students learn how to manage their finances and be responsible with credit. This is a great solution for holders who face emergencies such as medical bills, medicines, and other expenses. Many issuers feature no annual fee and generous bonuses for timely payments. Students can pay unforeseen expenses such as bus and train tickets, extra textbooks and notebooks, entertainment, and food. In some cases, parents have financial problems and find it difficult to send or transfer money. This is when a student card comes handy. Some issuers even offer bonuses and discounts to young people who maintain a good GPA. Banks also advertise rewards programs and cashback. Customers can redeem the points for gift certificates, school supplies, and merchandize in different online stores and retail outlets. Some banks also offer promotions and discounts on school-related items, clothing, books, textbooks, and more. Student cards help holders to pay for language-learning materials, online courses, and other aids.
There are points and other complicated awards that give customers the option to buy a gift certificate up to a certain percentage of the face value. Another option is to select goods or services from a catalogue. With some retailers, values fluctuate, and it pays to call and ask what they are worth. Monetary benefits are also worth exploring. Most companies and banks offer lower interest rates to young people so that they don’t have to pay hefty interest charges. In addition, students benefits from text messaging services that allow them to view their outstanding balances.
In many cases, it is better to save money and then buy things. The problem is that many students work part-time or are unemployed and need cash for their day-to-day expenses. Issuers are aware of this and advertise their products on a growing market.
Options Available to Young People
There are two options to choose from, unsecured and prepaid credit cards. The prepaid option is a good choice for students because it allows them to deposit money and spend up to the amount deposited. Many car rental companies, airlines, retail stores, and hotels accept prepaid cards. Customers can use it at gas and gasoline stations, drugstores, fast food joints and diners, boutiques, and grocery stores. They can pay electricity and water bills and purchase different things. The only difference between prepaid and unsecured cards is that the latter provides a credit line. Another option is to apply for a debit card with a credit limit. Money spent is deducted from the available balance in the debit account. Holders can spend up to the limit (existing funds in their account).
Products and Features
The interest rate varies depending on the issuing bank. It is in the range of 11 – 19.8 percent. Customers with a good payment history are offered a low interest rate. Applicants should be full- or part-time students and of the age of the majority. Cosigner is usually not required, but some banks ask that a parent, guardian, or another party cosigns together with the applicant. Redemptions are offered in the form of direct deposit, account credit, airline travel, checks, charity donations, and loan rebates. Perks usually include auto rental and travel accident insurance and travel assistance. Most issuers charge a late fee of around $35 and offer a low spending limit.
How to Apply and Use a Card
University students often receive offers from different companies shortly after they start college. This is because issuers know that young people are short of cash and look for different sources of cash. Moreover, they are easily accessible and have little or no exposure to credit. The best option for young people is to apply with their bank, especially if they have a transactional or savings account. This is a good idea because it allows students to use online banking to view their debit and credit card balances. Making online payments is also an option.
Before choosing a particular product, it is important to inquire whether the APR is an introductory interest rate. The available limit is another factor to consider. While it is tempting to choose a product with a high limit, this makes it easier for customers to overspend. It is a better idea to choose a product with a low limit and learn how to handle small payments. Then you can upgrade to a card with a high limit. Finally, issuers assess different types of penalties for missed and late payments, as well as high penalty rates. They can be as high as 30 percent. The fee will be lowered once the borrower makes six consecutive timely payments. In general, it is wise to pay the balance in full if the interest rate is in the range of 14 – 20 percent. Otherwise, you will end up paying hefty finance charges.
While students are inundated with offers from different issuers, you may want to start with one credit card with a low interest rate and no annual fee. People with compromised credit can apply for a gas or department store card. They are easy to qualify for but carry a high interest rate compared to lines of credit and other products. This is a good solution only for customers who pay the balance in full (carrying a balance is very expensive). Another downside is that you can make purchases only at the particular department store or gas station. On the good side, many retail stores offer discounts on different items. Discounts are offered to encourage customers to buy more.
Common Fees to Watch For
Issuers charge different fees such as balance transfer, cash advance, and application fees. The annual fee varies from $0 to $30 a year. Most student cards feature no annual fee. It is assessed at the time of making an application. Secured credit cards usually have an application fee. Some financial institutions are willing to waive the fee. Other charges and fees include over-the-limit, balance transfer, and returned check fees, and finance charges. Banks and financial companies charge up to $35 in returned check and over-the limit fees and up to $25 in late fees. Finance charges are actually interest charges paid after the grace period is over. Most cards go with an interest-free period of 22 – 25 days. No interest is assessed only if the product features a 0 percent interest rate. The finance charges vary based on different factors, including the method of calculation, the outstanding balance, and the APR. Some issuers also charge cash advance fees of 2 – 4 percent of the amount withdrawn. Students are advised to choose a card that has no cash advance fees. Those who opt for a balance transfer card should check whether transfer fees apply. Banks charge up to 3 percent of the amount to be transferred.
Top 5 Student credt cards
L'earn™ VISA* Card
L'earn™ VISA features money rebates, instant cash advances, and car rental discounts and allows borrowers to establish credit. Cardholders earn up to 1 percent in cash rewards on eligible purchases over $1,000. The earn rate is 0.25 percent on the first $500 in purchases and 0.50 on the next $500. Holders are free to order additional cards and are offered credit card balance coverage in the event of lockout, strike, job loss, and other events.
- Interest rate: 19.99 percent
- No annual fee
- Interest-free period: 21 days
CIBC Aventura® Visa* Student Card
A yet another student card that goes with no minimum income requirement, CIBC’s VISA also features a welcome bonus of 5,000 points and offers the opportunity to earn 1 point on $1 in purchases and extra points on purchases at hotels, restaurants, inns, etc. There are no blackout periods, and the card features added benefits such as authorized spending limits, auto rental collision coverage, a mobile payment app, and others.
- Purchase rate: 19.99 percent
- Annual fee: $39
- Up to 3 free additional cards
Laurentian Bank Student VISA® Black Card
This VISA card goes with flexible eligibility criteria and allows students with limited credit exposure to build rating. Holders earn 1 point for each $1 in eligible purchases and are offered a number of benefits, including convalescence assistance, legal assistance, balance reimbursement in the event of disability and job loss, etc. Students also enjoy attractive discounts on various activities, travel, merchandise, and so on.
- Monthly fee: $3.50
- Additional cards: free
- Interest rate: 19.99 percent
Desjardins VISA® FOR STUDENTS ONLY Credit Card
Desjardins offers a student VISA to help customers build credit and save on annual fees and interest. Students also enjoy add-ons such as mobile device insurance, free 3-day travel insurance, annual cashback, and others. Additional cards are available free of charge, and students also benefit from cash advances of up to $2,500 daily, mobile payments, Hertz discounts, and others. There are no transaction fees, and students are offered overdraft transfers as an added protection for bill payments and checks.
- No annual fee
- Interest rate: 19.9 percent
- Annual fee: $30
- Interest rate: 12.9 percent
StudentAwards MBNA Rewards MasterCard® credit card
Another rewards option for students, this card allows students to earn 1 bonus point on each dollar in eligible transactions. Points can be exchanged for charitable donations, gift cards, merchandise from major retailers, travel solutions, and cash back. There are other benefits for accountholders, including instant access to cash advances, fraud protection, and more.
- Annual fee: none
- Cash advance interest rate: 21.99 percent
- Purchase interest rate: 19.99 percent