Tips & Suggestions for Student Credit Cards
We have all heard horror stories of individuals or families ruined by runaway debt. These days, many college students graduate with a degree – along with years of credit card debt.
Given the damage that misuse of credit cards can cause, you may wonder why Space Coast Credit Union offers savings-secured cards to students starting at age 15. It’s simple: the sooner you learn how to manage credit, the better off you’ll be when you are living on your own and facing the barrage of credit offers that will come your way daily.
Used correctly, a credit card is a good way to establish credit, as well as a convenient means of payment. However, it is important to educate yourself on using credit cards responsibly.
When you – and your parents – agree you are ready to step into the world of credit, you can start with an SCCU savings secured credit card. At age 15, eligible members can apply for a savings secured credit card with a joint account holder who is a parent or legal guardian.
Your Primary Share Savings Account will be used to secure your card, and you’ll need to have an amount on deposit that at least matches your credit limit. It’s wise to start with a low line of credit–like $300.
What you should know before opening any credit card account:
Q. Why not avoid the whole issue and use a debit card?
A. Purchases made on a credit card build credit history; debit purchases do not. Opening a credit card account and managing it wisely will help you build a good credit history, which is essential for future financial success. A variety of people and businesses (e.g., financial institutions and other lenders, insurance companies, rental agencies, landlords, even potential employers) will make decisions affecting your future, based on your credit history. The rate you pay for almost any loan will be based on your credit history – and that includes the rate on credit cards. The better your history, the lower the rate you pay. That’s why it’s so important to establish a positive record.
TIP: One of the little known aspects of credit scoring is that your score is influenced by the length of your credit history. Lenders look for 5 to 7 years of history in granting the best rates on loans. Starting your credit history at age 15 means that you can be eligible for a low rate much earlier than if you get started at age 18 or later. The benefit of this early start will become clear when you decide to finance your first car or first home, and don’t need a co–signer or a huge down payment to get a decent rate on a loan.
Q. Aren’t all credit cards about the same?
A. No. Study the disclosures that come with credit card offers, and you’ll start to see the potential disaster that lurks in that miniature type. For example, unlike SCCU credit cards, many cards feature:
High annual fees
Incredibly high interest rates – as high as 26.99%
Interest rates that rise sharply after an introductory period
Little or no “grace period” on purchases
Two–cycle billing, which can increase your finance charges if the bill is not paid in full at the first billing. Interest is retroactive back to the date of purchase
Steep late fees
Rate hikes if you ever pay late
Fees to transfer balances to the card
High credit limits. Keep in mind that even if you don’t use all of your credit, any credit line you have will show up on your credit history as potential debt! This could affect your ability to be approved for a loan you really need, such as an auto loan or mortgage. If you ever need to borrow a large amount of money, there are more sensible alternatives than revolving a credit card balance
Q. What can an SCCU credit card do for me?
A. As a member–owned cooperative, SCCU’s goal is to offer financial products that benefit the members with no lies, no rip-offs, and no time wasted. When you carry an SCCU credit card, you can rest assured that the card has been designed to benefit you, not generate a huge profit at your expense.
Learn more about SCCU’s Student Credit Builder Card.
The information on this page is for educational purposes only. SCCU is not engaged in providing estate planning or other advice. Please consult with a competent estate planning professional regarding any specific estate planning questions.