As a college student, credit cards often are a necessary evil because you can’t always rely on money from a part time job or from your parents to cover large expenses. Especially in an emergency requiring immediate spending, a credit card can be truly valuable. Unfortunately, recent changes have made it increasingly difficult for a college student to obtain a credit card. Here are some things you need to be aware of when trying to obtain a credit card as a college student:
In February of 2010, it became illegal for credit card companies to offer credit to most individuals under the age of 21. Credit card companies had long targeted 18 year olds who had little understanding of the world of credit, and the Credit Card Act of 2009 forced them to end this practice. Presently, credit card companies can’t approve a credit card application by someone under the age of 21 unless they provide proof of their ability to pay or they have a co-signer such as a parent, guardian, or spouse.
While credit card companies don’t reveal a set income that is required for credit worthiness, a person under the age of 21 must have substantial income to receive a card solely in their own name. Part-time jobs and work-study income are no longer accepted as adequate income in many cases. Most credit card companies appear to require a full-time job with a minimum of several months of full-time employment history. Although the new regulations were targeted to those under 21, students 21 and older will still need to show income that the credit card company deems adequate to be approved.
For students of any age who do not have a sustained and verifiable income, a co-signer is the only way to be approved for a credit card. A co-signer provides their information on the credit card application and takes responsibility for the bill in the event the primary cardholder does not pay. For example, if a student takes out a credit card with their parent as a co-signer, then fails to pay back their debt, their parent is then responsible for the debt. In addition, late payments or defaults by the primary cardholder will also affect the co-signer’s credit score.
Even if you qualify on paper, you should decide if you are ready for a credit card. Irresponsible use can lead to high interest on a balance you can’t pay off as well as the potential for late fees or damaging your credit score. Be sure that you will be able to limit yourself to only spending what you can pay off each month and that you will only decide to carry a balance in the event of a true emergency. If your definition of emergency is last-minute concert tickets, you may want to hold off on getting a credit card.
If you are ready for a credit card, shop around for the best one. Although credit card companies have been forced to reduce marketing to people under age 21, there are still many cards offering perks to attract those that are qualified. Some cards offer a 0% APR for a set amount of time even if you carry over a balance from month to month. If the balance is paid in full when the interest-free period ends, no interest will be paid on the card. Many cards offer a rewards program. These cards often have a higher interest rate, but offer rewards for using the card such as cash back or points towards entertainment, travel and goods.