Exploring Credit Card Choices for Beginners: Should You Opt for a Student Card or a Secured Card?
Student credit cards can be a valuable tool for building credit while navigating the financial challenges of higher education. Here's what you need to know about student credit cards.
Firstly, it's important to note that student credit cards do not require a security deposit. This sets them apart from secured credit cards, which typically require a cash deposit that acts as collateral.
To qualify for a student credit card, applicants must be enrolled students. However, if the applicant is 21 or older, they can include not only independent income but also other income to which they have a "reasonable expectation of access" on their credit card application.
Some student cards come with perks like bonus cash back if you maintain a certain grade-point average or a free Amazon Prime Student membership for a year. But, it's worth mentioning that some student credit cards may only be open to applicants who already have some credit history.
For those who are new to building credit, it can be harder to qualify for a student credit card. In such cases, secured credit cards can be an alternative. Unlike student or unsecured cards, secured credit cards require a cash deposit that typically becomes the credit limit. Secured credit cards can be easier to qualify for, even for individuals with little to no credit history or a bad credit history, as some secured cards process applications without a credit check.
International students can also apply for student credit cards, even if they don't have a Social Security number. Some student credit cards available for international students in the USA do not require a deposit and are accessible to international students with valid visa status and a US address.
Alternative credit cards, which don't require a deposit and may not rely solely on the traditional FICO scoring model, can be another option for building credit. They can evaluate creditworthiness based on factors like income, employment, and bank account balances.
Annual fees are common for secured credit cards, but no-fee secured cards exist that tend to charge higher interest rates. It's essential to consider the overall cost of the card, including interest rates and fees, before making a decision.
After responsible use, some secured cards may increase the credit limit or graduate the user to an unsecured card. Most secured credit cards do not offer rewards programs, but over time, with responsible card use, you'll qualify for other cards with robust rewards.
Remember, becoming an authorized user on someone else's credit card is another way to build credit, but it requires trust and good communication with the primary cardholder.
Lastly, make sure the student or secured card of your choice reports your account activity to the three main credit bureaus: Equifax, TransUnion, and Experian. This is crucial for building and maintaining a good credit score.
In conclusion, student credit cards can be a helpful stepping stone for building credit. By understanding the different types of credit cards, their requirements, and benefits, you can make an informed decision that suits your financial needs.
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