A credit card is often the very first entry on most young people’s credit reports, but many of them struggle to get that first card approved. You may be comparing a student credit card to a regular secured credit card because both have a faster approval process.
Lenders are frequently afraid to work with young people since there is little data to show how they will handle the obligation and be able to maintain payments.
Fortunately, student and secured credit cards are two types of credit cards that you can apply for even if you have no credit history. So, which is better, a student credit card or a secured credit card?
One of the primary distinctions between a student and a regular credit card is that student credit cards are expressly meant to assist college students in establishing a credit history.
They function similarly to traditional credit cards, but they are significantly easier to obtain. You don’t need a specific credit score – or any credit history at all.
To receive a student credit card, you must be at least 18 years old and show proof that you are enrolled full-time or part-time at a recognized university.
Many card issuers will record your payments to the three main credit bureaus if you use a student credit card and pay your credit card bill on time each month. You’ll gradually develop a credit history and credit score this way.
Many of life’s milestones, such as securing a mortgage for your first home, may be dependent on your credit score after college.
Your credit score can also affect your insurance premiums, whether or not a landlord would rent you an apartment, and even whether or not an employer will hire you. You may get your credit history off to a solid start by starting with a student credit card.
Even with a student card, you’ll need to show proof of income. In most circumstances, a part-time job is sufficient. The card company simply wants to ensure that you have a way to repay what you owe.
A student credit card might help you keep track of your monthly expenditures and get in the habit of paying your bills on time if you aren’t already proficient at planning and budgeting.
Furthermore, student credit cards have purposefully limited credit limits, so you may avoid getting into too much debt.
The best student credit cards, like standard credit cards, offer additional benefits. When it comes to a student credit card vs. a secured credit card, a student credit card is more likely to offer some sort of reward.
However, don’t expect to win hundreds of dollars in cash or expensive tickets for a vacation. Credit limits for student credit cards are often modest, often $1,000 or less. So, if your student card offers 1% cashback on all transactions, the maximum you may receive in a month is $10.
Some may be disappointed by this, but keep in mind that you are not using a student credit card for the rewards. You’re using it to establish yourself as a responsible consumer and to begin developing credit.
Secured credit cards aren’t exclusively for students, but they can help young adults develop credit if they don’t qualify for a student credit card.
While both student and secured credit cards are easier to qualify for, a secured credit card is more likely to accept an application with weak credit.
A secured card is one that demands a security deposit. This is typically equal to your credit limit. It normally starts at roughly $200, but you may be able to put down more if you want a larger credit limit on your secured card.
If you do not repay what you owe, the card company will keep your security deposit. However, as long as you make your payments on time, the company will refund your deposit if you ever close your protected card.
Advantages not previously mentioned. Some secured cards have very important benefits such as credit fraud warnings and free credit monitoring services. However, unlike student credit cards, this type of card does not typically offer incentives such as cash back or travel miles.
Because the security deposit reduces the risk to card issuers, you don’t need a perfect credit score to apply for one of these. In fact, if your score is less than 600, you may be approved.
However, credit cards typically have high interest rates, often exceeding 20%, which can be detrimental if you carry debt from month to month. However, when comparing a student vs. secured credit card, both are likely to have a high APR.
It is best to avoid carrying a balance on either. The limited credit limit is a benefit of the secured card, especially if you have difficulties limiting your spending — it’s impossible to get into too much credit card debt.
When deciding between a student credit card and a conventional secured credit card, student credit cards are usually the preferable option, that’s if you qualify. Many do not charge an annual fee and do not require a deposit.
However, if you do not qualify for a student credit card, either because you are not enrolled in college or because you already have some negative marks on your credit report, a secured credit card is a viable option.
Look for one that does not charge an annual fee and has a reasonable security deposit.
When considering what card to get and choosing between a student and a secured credit card, it’s key to manage your new card responsibly and avoid credit card debt.
A credit card might help you improve your credit score if you keep below your credit limit and make all of your payments on time. However, it is just as easy to damage your credit if you fail to make your monthly payment or consistently exceed your credit limit.