What is the difference between student credit cards and secured credit cards?

What is a Student Credit Card?

A student credit card is designed for college students who are building a credit history while studying and are still learning how to manage credit. You will have a strong credit history that will be useful when you graduate and need to apply for an apartment or your first car loan. To qualify for a student credit card, you may need to prove that you have an income, that you are enrolled in a two-year or four-year school, that you are 18 years old or older (in most states), and that you have a Social Security number.

Benefits

A card specifically designed for the college student market can be the best option. After all, student-focused benefits and rewards can be advantageous – such as data credits for cumulative GPA scores of 3.0 and above or a one-year Amazon Student subscription. One common advantage is very similar to traditional credit cards – a sign-up bonus for new cardholders when spending a certain amount.

Most student credit cards offer various rewards and benefits. Cash back on purchases ranges from 1% to 5%, although there can be some restrictions: limitations on eligible purchases for cash back, earning limits, or time limits on how long you can earn rewards.

If you travel or study abroad, there is at least one card that offers rewards you can redeem for travel, and many do not charge fees when using your card abroad.

Some also provide benefits such as secondary car rental insurance, mobile phone protection, and roadside assistance.

Many student cards encourage credit building through rewards for paying on time or keeping your account in good standing (discounts on streaming services, an extra 0.25% cash back, or cumulative cash bonuses). And if you miss a payment or are late for the first time, the late fee may be lower than usual or waived by some cards.

Essentials

Now, the fine print. Student cards typically start with a minimum credit limit ranging from $300 to $500, which is lower than many other types of cards. After several months, issuers may review your card usage and offer an increase in your credit limit.

Student credit cards may accept those with poor credit history; for example, someone with “fair credit” may qualify. Given college budgets, most student credit cards come with no annual fee.

According to The Balance research, student cards come with interest rates lower than the average consumer credit cards. Some student credit cards even offer a 0% introductory annual percentage rate – purchases will not accrue interest for six to twelve months.

After graduating from college, your card issuer may reclassify your card to a more traditional one; be sure to read the fine print for any potential changes (like interest rates).

What is a Secured Credit Card?

Secured credit cards are much simpler than student cards. Generally, secured cards are designed for two audiences: those with no credit and those trying to rebuild a poor credit history.

Essentials

Your security deposit serves as your credit limit. So, if you deposit $500, your credit limit will be $500, meaning you can spend up to $500 on your credit card but no more. Limits can vary with your deposit, as long as you have the excess cash and meet any specific qualifications set by the issuer, such as income requirements. Deposits and spending range from $250 to $5,000, based on what most secured cards offer.

Deposit
Your deposit is fully refundable. The bank may return your deposit or provide it as a credit on your financial statements when you make payments on time and then transition to a traditional account.

Secured credit cards typically come with higher interest rates than business, student, cash-back, and travel reward cards. Most secured credit cards do not offer cash-back rewards, and many charge an annual fee.

Note: Secured credit cards from credit unions may offer lower interest rates and may come with benefits such as travel accident insurance, rental car collision insurance, travel and emergency assistance, and mobile phone coverage. The secured deposit may also earn interest.

Student Credit Cards vs. Secured Credit Cards

Here is a comparison table of the features we’ve discussed:

Conclusion

Typically, a student card offers more college-related benefits, cash-back rewards, and perks compared to a secured card. You will also benefit from a lower interest rate, no annual fee, and some cards will allow you to have a co-signer if you do not have good enough credit to get a card.

However, if you have a good relationship with your current bank and some extra cash from summer jobs, a secured credit card might also be suitable in the short term. Additionally, if you need to access a higher credit limit immediately, a secured card may give you more control in that area – though it may also charge higher interest rates.

There are other ways to build credit besides student or secured cards: Secured Loan: This allows you to show regular, timely payments. These loans are often available at credit unions and banks, potentially at a lower interest rate than you would find with unsecured or student credit cards. Become an authorized user: Parents can also add you to their credit card as an authorized user. Your credit history benefits if the parent’s account has a history of on-time payments. However, the primary cardholder usually has full access to the account and payment history. Monitor your credit: Sign up for a free credit monitoring service and check your credit report for any errors that may be harming your score. Pay on time: Paying on time is the most influential factor in shaping your credit scores.

Source: https://www.thebalancemoney.com/difference-between-student-and-secured-credit-cards-5115305