For many college students, who may not have a lot of money or even a job at all, owning a credit card may seem out of reach. Without money in an account and assurance that you can pay your monthly credit bill, the average student may not seem very “credit-worthy.” Still, it can be important to build a credit history for certain opportunities down the road (such as getting a loan to buy a house). You may be surprised to learn that there are plenty of companies that offer special options for younger customers, especially students. The following are some offers to look for:

• Error forgiveness: Since you may be new to the responsibility of owning a credit card, it’s good to look for plans with error forgiveness. This may include a 0 percent annual percentage rate (APR) for the first six months of a contract or waive user penalties if you miss or have a late monthly payment for the first time.
• No extra fees: Along with 0 percent APRs for the first six months, some credit cards don’t charge students for using their cards in other countries. This is a nice feature for students interested in studying or traveling abroad.
• Rewards for good grades: Some companies offer credit card agreements that reward students for excelling academically. For example, you may receive cash back every year if you maintain a certain grade-point average.
• Effective customer service: Credit card companies that have positive customer service reviews often provide extra support in answering questions from new customers. Some companies also have tools for their customers’ online accounts that help them pinpoint their spending and payment habits.^[1]

Risks and Rewards of Credit

Credit cards can give students new opportunities, but owning them is also a big responsibility. Students should consider the advantages and disadvantages of credit before choosing the best plan.

Pros

• Saving money: Credit cards can be connected to checking accounts so that companies know where their customers’ money is coming from and they have an account to charge interest rates to. The account can help students practice saving money rather than needing to having a lot of cash on hand. This can make it easier for students to make large payments for things like tuition and unexpected expenses like vehicle maintenance or medical bills.
• Receiving benefits: In addition to cash back for good grades, credit card companies may offer other benefits such as store discounts, gas rewards, and points toward air travel.
• Building credit: If you pay off your monthly credit card every month on time, you will start building credit and have a good credit score early on. Your credit score can be an important factor later on if you decide to open another account or take out a loan. Some employers may even want to see your credit history.

Cons

• Overspending: If something is out of sight, it may be out of mind, and the same can be true of money. Sometimes people overspend with credit cards because it’s easy to think that you have more money than you really do.
• Interest: Credit card companies with student deals still typically include some level of APR or interest rate. If you don’t pay off the entire balance every month, using a credit card can be expensive. Suppose you decide to use your credit card to pay for $1,000 in school supplies and books. Credit card 1 has an APR of 10 percent, and credit card 2 has an APR of 24 percent. If it takes you a year to pay off the $1,000, you’d actually pay a total of $1,055.04 with credit card 1 and $1,134.72 with Credit Card 2—that’s $55 or $135 on top of the original $1,000 you charged. This example highlights the importance of making sure you pay off the balance as soon as possible AND choose a credit card with a lower interest rate.
• Debt: Unlike debit cards, credit cards allow users to borrow money that they can pay back at a later date. While this can be useful in emergency situations, you may end up charging more than you can afford to pay back right way, and you may find yourself saddled with debt. Carrying a lot of debt can damage your credit history and score.