Rounding it up
As long as you meet the requirements of your province, you’ll be able to apply for a credit card even as a student.
With a card in hand, you can get a head start on establishing a strong credit history.
Credit cards also help you make purchases that are otherwise difficult to buy in one swipe, but ensure you pay back what you owe to avoid steep fees.
If you’re nervous about getting your first credit card, consider signing up for a joint account or with a guarantor.
Completing your student life and preparing yourself for the professional field is no easy—or cheap—feat. That’s why many soon-to-be students consider getting credit cards before the big date.
But this decision comes with important questions about credit cards and their credit history like, “Can students even have credit cards?” Or, “Are credit cards even useful to those still completing their college careers?” Here’s a breakdown of everything having to do with credit cards that a savvy student should know, and how to consider all the options before making a final pick.
Student credit cards are both possible and popular
Let’s get the first question out of the way—students in Canada can have credit cards if they meet certain requirements; you must be a resident of Canada of either 18 or 19 years old, depending on the province of residence.
Not all students in Canada and the United States have personal credit cards, but they remain quite popular with the majority of university students in North America. They are usually at the perfect age to start establishing a strong credit history for themselves, which allows them to obtain a mortgage, car loan, or other loans in the aftermath of their graduation.
It seems like students are well aware of the value of credit cards; according to the 2018-2019 Student Expenses and Resources Survey, approximately 60 percent of surveyed students had at least one credit card in their name. The majority of these students relied on their credit cards to pay for educational expenses and the everyday costs of living.
Credit cards aren’t the only popular method that students rely upon to make financial ends meet. Valuable tips like the 30-day savings rule can help you keep control of their financial affairs during a period of life that’s often defined by sudden changes. With the help of that rule and the proper management of a credit card, students can begin the important work of establishing credit for themselves. Prepaid credit cards—hybrids of traditional credit cards and debit cards—are also quite popular with students as they make it easier to stay within a budget. That’s what makes the KOHO reloadable prepaid Mastercard such a great choice for students of all kinds!
Why does your credit history matter?
Your credit history is effectively a history of whether you’ve repaid your loans on time. An excellent credit score can help you obtain a mortgage for a house or a loan for a car. It’s also valuable if you need to secure a loan to start your own business or pursue further education after undergrad.
Luckily, your credit history can be developed early on with the help of a credit card. Provided that you repay what you owe at the end of each month, a credit card is an excellent tool for an up-and-coming professional to prove that they can be trusted with financial loans. There are even credit building apps that help you keep track of your responsibilities while dispensing with helpful advice that can steer you in the right direction.
In addition to helping you develop a strong credit history, a credit card also serves as a marker of independence. Many university students are proud to own a credit card because it signifies that they’re stepping away from the nest for the first time in their lives. There are risks as well as benefits to owning this piece of plastic; however, you should familiarize yourself with the responsibilities associated with a credit card before making the dive.
The pros and cons of credit cards
There are many enticing benefits to having a credit card as a university student, though different cards offer different perks which may serve some better than others. Students who frequently use their credit cards to make everyday purchases may be interested in a “cash back” card, for instance, which returns a certain percentage of all the money you spend. Select merchants may offer better cash back percentages than others, so do your research before making a final decision.
Let’s not forget about virtual cards! They simplify the online shopping process (no need to get up from your coach and dig for your wallet) and can add an extra layer of security against fraud and thieves.
Familiarizing yourself with the pros of credit cards is helpful, but you’ll also want to learn about the potential drawbacks to using such a card. Credit cards often come with interest rates that make accumulating debt all too easy. You’ll also need to keep track of credit card fees and pay attention to your credit score.
Successfully using a credit card requires making a commitment to paying back what you owe on time each month. If you accumulate debt without paying it back at the end of the month, your credit score will take a hit. Again, this little number could negatively impact your ability to get a mortgage, car loan, or other line of credit in the future if it leads lenders to believe you’re untrustworthy. Responsible students who manage a card well won’t have to grapple with these challenges.
How to choose the best credit card for you
There’s no universal answer to, “What’s the best credit card?” Every person has different needs and financial means which will impact this answer. Luckily, the Canadian government has made it quite easy to compare different credit cards with an online tool. It can narrow down your credit card search by selecting your province or territory, your preferred currency, and if you want a low purchase interest rate.
Students who are worried about the amount of responsibility that a credit card entails can also invest in a joint credit card. You and another person – called a co-applicant – can apply for a credit card together. You will both have access to the account and share the responsibility of paying back what you owe. If you go this route, choosing a responsible co-applicant is just as important as choosing the right credit card.
There’s also an option for students who worry they may not qualify for a credit card by themselves. If you have an unestablished credit history, a “guarantor” can step in and help you get access to a credit card. This guarantor is ultimately responsible for paying off the card if you find yourself unable to pay your debts, and is often a parent, guardian, or close relative of the student in question. The presence of a guarantor may be required to get a credit card if lenders aren’t certain you can pay back what you owe at the end of the month. You can learn more about guarantors and joint credit cards at the official page provided by the Canadian government.
Now that you’re ready to pursue your first credit card, there are some final steps to take in order to guarantee your long-term financial success. Ensure you stay on top of your payments and keep track of your budget so you don’t accidentally go into debt. If you do miss a payment though (after all, this is a learning process!), review how credit card companies generally calculate owed interest. You should also bookmark a helpful resource provided by the Canadian government that explores how to get out of debt if you end up spending too much money.
Remember that credit cards are a financial tool like any other, and that you’re in charge of your own financial future. These tools can free up financial futures that would otherwise be unobtainable, but handling them responsibly is of the utmost importance. Keep your head about you when applying for and using a credit card, and you’ll soon join the legion of students who successfully reap the benefits of their credit cards every day.
Ryan Severance is a professional freelance author and the owner of American Scribe LLC. With degrees in political science and socio-legal studies, he writes about business, politics, and law for clients around the world.