Student Credit Card Basics

Most high school and college students will find it difficult, if not impossible, to be approved for a standard credit card. Fortunately, there's another option. Students can apply for a student credit card, which is not only easier to get, but can help them start building a credit history.

For the most part, a student credit card is just like a standard credit card. But, because this is the students first chance to prove they can be financially responsible, a student credit card might come with added restrictions and limitations.

A Student Credit Card Will Have a Lower Credit Limit

A lower limit is the providers attempt to prevent misuse and abuse. Until the student can show that they can be responsible, and will actually repay the amount they've charged on their credit card, the provider will try to limit the amount they could potentially lose if the balance is never repaid. Usually, the limit on a student credit card is between $500 and $1000. Once students have shown that they can be responsible in paying their bills on time, the limit might be raised.

A Student Credit Card Will Have a Higher Interest Rate

This is another way providers try to limit potential losses. The theory is that, since most students don't have a proven track record of paying their bills, there's a higher probability that many of them won't, which could mean a financial loss to the provider. By charging a higher interest rate on every student credit card they issue, the provider is, in a way, making up for the money they could lose on those who might never pay off their credit card balance.

You Might Need a Co-Signer on Your Student Credit Card

This is another form of insurance for providers. A co-signer is someone who agrees to be responsible for the balance on your student credit card if, for any reason, you are unable to pay it yourself. The co-signer on a student credit card is usually a parent or guardian. And, as the co-signer, they will have control over whether or not the limit will be raised.

While there are some restrictions and limitations on a student credit card, getting one can be the first step to building a good credit history. It can also be a great help in easing the financial struggles many students face, especially when they first get to college.