Put Credit Cards 101 on Your College Curriculum

​​Many of the lessons that students learn while at college are learned outside the classroom. One of the most important lessons is learning how to manage your living expenses. For many students, college is the first time they are truly out on their own. It’s not as easy to ask mom or dad for extra cash for unexpected expenses while you are away at school. That’s why most students have college credit cards.

Living on your own at college probably marks the first time you will have to deal with banking, credit, and credit cards. You may need to borrow money or sign up for student loans to cover tuition. You also need to have your own bank account to pay bills. And you also will need credit cards to cover school expenses, travel, and emergencies. College is the ideal time to learn what you need to know about bank accounts and credit so you can achieve financial independence.

The goal of college credit cards is to achieve as much autonomy as possible in spending and managing your credit, but you also want some guardrails. Racking up credit card debt is a common problem with students. Average credit card debt is dropping in 2021, except for Gen Z, which includes college students. Their average balance increased from $1,522 to $1,616.

The best strategy for college credit cards is to find a credit card that gives you the freedom you need—but within limits.

Getting That First Credit Card

When you reach age 18, you are legally considered an adult, and you need to establish credit. If you have a part-time job or a bank account, you may have already started to establish a credit history. Signing up for a college credit card is an ideal way to build your credit.

To qualify for a personal credit card, you must be 18 or older, although if you are 21 or older, it’s easier to qualify for a credit card. You also need to be able to show income. Income can be in the form of a paycheck, college grant, financial aid, regular allowance, or something else. The higher your income, the higher your potential credit limit.

If you can’t show income or your credit card application is rejected, you still have options:

Student credit card 

As the name implies, a student credit card is for college students who haven’t built up a credit history and won’t qualify for a conventional credit card. Student credit cards usually have lower credit limits and higher interest rates, so look for cards that give you the best terms, including interest rate, purchase protection, overdraft protection, identity theft protection, and so on.

Secured credit card

A secured credit card is a tool that helps you build a credit history. It works like a debit card. You deposit an amount of money into a special account to guarantee the credit card. If you are late or fail to make a payment, the credit card company can claim your deposit. Secured credit cards are especially popular with students as a way to establish credit. Since the cards are prepaid getting approval is easy, and many credit unions like iQCU offer one rate, regardless of your credit history. 

Cosigner

If you don’t have sufficient credit to get a credit card, you can use someone else’s credit. When you get a cosigner, such as your parents, to guarantee the credit card, they become liable for the debt if you default or make late payments. The advantage to this approach is you are building your own credit even though a third-party guarantees payment.

Share your parents’ credit card

You also can have your parents or guardian add you to their credit card as an authorized user. While this approach gives you credit card access it doesn’t help you establish credit, since it isn’t your credit card. It also means that you are continuing to use your parents’ money, which means you have no real control over your own expenses or spending,

Many parents can use college bank accounts and college credit cards to help manage their student’s spending. For example, setting up a joint checking account makes it easy for parents to transfer money into the student’s account. Joint credit cards also allow parents to monitor spending. Using a secured credit card or a card with a low credit limit can keep students from overspending.

Shopping for a College Credit Card

When shopping for a college credit card—or any credit card—you should look for specific features and criteria:

• Interest rate: Look for the lowest interest rate. If you must carry a balance on your credit card, then it pays to save on the interest you have to pay.
• Penalties and fees: Read the fine print to find out the penalties and fees. For example, are there late payment fees? Will the card’s interest rates go up to a penalty rate for missed payments?
• Perks and rewards: To entice consumers, many credit cards offer benefits or rewards such as points toward consumer goods, travel points, cash back, fraud protection, and so forth. Look for perks that match your needs. If you like to travel, consider a travel card. If you want a little extra money, consider a cash card.
• Grows with you: As your credit improves and your needs change, you want your credit card to grow with you. Look for a card that will increase your credit limit over time.

There are many sources for credit cards, but consider going to your credit union. You want a financial institution that is large enough to offer security but not so large that you can’t get the service you need when you need it. If your card is lost or stolen, or if you need to dispute a charge, dealing with a large bank can be frustrating. Credit unions, on the other hand, are structured to serve their members, so you tend to get better service. Credit unions are typically nonprofit organizations, so you also tend to get better rates. If you have trouble qualifying for a credit card or have trouble with a payment, it’s easier to find someone who can help when you call a credit union.

iQ Credit Union has credit cards for every need. If you are just starting to build your credit and need help getting your college credit card, iQ may be able to help. To learn more about managing your credit, be sure to check out our guide to Understanding Credit: The Good, the Bad, and the Ugly.