Heading back to school or college and in need of a credit card? If you’re thinking of applying for a credit card to be able to live a better lifestyle and spend more money, you have the wrong mentality! If you want a credit card so you can start building good credit, you’ve got the right idea! Here are three ways to get your first credit card:
1. Secured Credit Card
On a secured credit card, you must make a security deposit of a few hundred dollars – this security deposit acts as the credit limit or the maximum amount of money you can spend. If you default on the card, the bank/credit card company will take your security deposit as collateral – this minimizes the risk from the credit card issuer’s point of view.
(READ: How to build a great credit score)
The goal of having a secured credit card is to eventually be approved for a traditional line of credit (a card that doesn’t require a security deposit and one that offers rewards points, cash back, airline miles, etc.). In order to accomplish this goal, use the credit card responsibly. Even one mistake can throw you off course. Here are some tips:
- Pay the balance off in full and on time!
- Use secured credit cards for small purchases (under $50 per month)
2. Traditional Credit Cards
If you can find a parent or relative who is willing to cosign on the card, then go ahead and apply for a traditional student credit card (meaning there is no security deposit and the card is not affiliated with a department store – it’s just a regular credit card from Capital One, VISA or Master Card, for example).
Also, if you have a job and are earning money, you may be approved for a card without having a cosigner. Remember, the Credit CARD Act requires a cosigner for anyone under age 21, unless you have the ability to pay off the card on yourself. The law never mentioned any specifics on what income a young person needs in order for the cosigner to be waived – it is up to the credit card issuer.
3. Credit Unions
Another option for students is to apply for a credit card at your school’s credit union. Credit unions are not-for-profit financial institutions formed by members. Here’s why credit unions are beneficial:
-Better Rates: Credit unions usually have higher interest rates on savings and checking accounts and lower interest rates on credit cards. Remember, credit unions are not-for-profit and they don’t waste any money on lobbying or high executive bonuses — unlike regular banks.
-Fewer fees: Don’t be surprised to find that most credit unions have very few fees, if any.
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