7 Benefits of a Student Credit Card

College life is the time for your son or daughter to establish freedom and individuality – and time to start establishing a good credit profile. College students are a big target for credit card companies. However, with the right attitude and strategy, a student credit card can offer many benefits to your student as a new consumer in the spending world.

Establish Good Credit

The first big benefit of acquiring a credit card as a student is the chance to firmly establish a credit history. Believe it or not, the first steps taken with a credit card can determine a credit history, good or bad, for possibly decades to come.

An excellent strategy with your student’s new credit card is to make small purchases and pay them off immediately, usually within a month. First, small purchases keep the available credit higher, and that’s a positive mark on a credit report. Secondly, making frequent payments to keep the balance at zero or just above zero shows that your student “pays as agreed” on his or her report.

Low interest and no annual fee

Many credit card companies that offer student credit cards have great deals with a zero percent introductory offer and zero annual fees. These benefits can help your student start smart with his or her first credit card.

Budgeting and financial management

With a credit card, it is important for your student to learn budgeting and prudently managing his or her finances. Help them set up a spending guideline that they can agree to stick to each month. That includes an amount that should be spent on credit card debt, and regardless of the credit limit, that is the most they should charge on the card each month.

Low initial credit limit

A low credit limit can be a great benefit to preventing a student from overspending and charging on their new credit card. Usually a student credit card will come with a limit of $200 to $500. These small limits can assure that your student does not rack up thousands of dollars in credit debt.

Financial buffer

Students always run out of money. A student credit card can be a financial “buffer” to help get a tank of gas to get home or a sack of groceries when the monthly budget has been spent.

Convenience

Convenience is another benefit for student credit cards. Charging for gas, textbooks, or even groceries on the student charge card prevents having to carry cash all the time. However, be sure to help your student keep careful track of all receipts so they do not overspend on the charge card.

Help secure a future job

Many employers today are using an individual’s credit score as a basis to determine whether or not to hire. If your student successfully manages one or more student credit cards during his or her college career, it may work well in securing a great first job after graduation.

Write to Grace Carter at grace@creditdonkey.com