Credit Card Alternatives For College Students

Credit Card Alternatives For College Students

Prior to the recent credit card reform act, it was a simple task for college students to get a credit card. In fact, it is common for students to get at least a couple pre-approved credit card offers in the mail every week.

In addition, credit card companies would set up stalls on college campuses to attract students to sign up for a credit card by giving out t-shirts, Frisbees and other freebies.

However the new standards set forth by the credit card reform act now makes it much tougher for college students to obtain a credit card. The law requires anyone under 21 years old to have a cosigner, usually the parents, in order to apply for a credit card.

The only exception is that the person under 21 can prove they have the ability to cover the payments on their own. However when you are a college student, you usually have very little if any income.

For students with parents that have good credit it won’t be a problem getting approved for a card. However with the recent recession, many parents may have lost their job or run into financial difficulties. They may have missed a few mortgage payments and therefore their credit score has been hurt. So even with them cosigning, a student may still be turned down for a card.

Some people feel that waiting until a person is 21 before they can get a credit card on their own is a good thing. These days most college students exit college with around $3,000 in credit card debt.

However not having a credit card can be an inconvenience for many students. A lot of college students use their credit card to cover some of their living expenses. Even if financial aid, student loans, scholarships, and a little help from parents, it still may not be enough to cover all expenditures.

Plus having a credit card is useful for emergencies. Such as when their car needs a repair, they can put the bill on their credit card. Or if their laptop breaks and they need to buy a new one for school.

Having to carry around cash all the time is a hassle. Not to mention you cannot order stuff online with cash. By buying textbooks online, students can actually be saving a bit of money every semester.

Some of the main alternatives to regular credit cards are secured credit cards, Visa and MasterCard debit, cards and prepaid cards. They are all good alternatives for students that can’t get a traditional credit card.

Secured Credit Cards

Secure cards are credit cards that require a security deposit and anyone over 18 can attain one.  You first deposit money into a special account at the bank and the available credit line of your secured card is the same as the amount in the account.

So if you deposit $500 then the credit line of your secured card is $500. If you want to raise your credit line than you would have to deposit more money. Most banks do have a minimum security deposit amount, which is usually around $300. Some banks many aslo charge an annual fee on their secured cards, which can be around $20.

You still do have to make and schedule the monthly payments on your  secured card since it is not a debit card. When you use it, the amount is not automatically taken out of your bank account to pay for the transactions.

Plus if you do not pay off your balance in full, you would be charged interest on it like a regular credit card. However payments you make on a secure card does help build your credit score and history.

Visa and MasterCard Debit Cards

Most major banks these days offers a debit card with either the Visa or MasterCard logo on them for checking accounts. This means they are accepted almost anywhere Visa or MasterCard are.

These cards can also be used online to make purchases. However you should be careful when shopping online since debit cards usually have less consumer protection compared to credit cards.

Some bank debit cards even offer a rewards program like with credit cards. You accumulate points when using the card for purchases and can redeem the points for gifts.

Most banks do have a minimum deposit and minimum balance requirement for a checking account.  Usually it is a few hundreds dollars but there are student checking accounts with lower limits.

Prepaid Cards

Prepaid cards from Visa and MasterCard are another popular alternative for those that don’t have a credit card. They are accepted anywhere Visa and MasterCard debit cards are, including online.

One benefit is that you don’t need to open a bank account to get one. Some of the more popular prepaid card options includes the Green Dot Card and the AccountNow Prepaid Visa Card.

To get one of these cards you just fund it with a specified amount from a bank account or with another credit card or debit card. You can also purchase and fund the Green Dot Card in person with cash. They are available in over 50,0000 stores nationwide, including CVS, 7 Eleven, K-Mart, Walgreen’s and more.

Prepaid cards charge you a low flat fee to open an account, usually less than $10. The good ones do not have any monthly or annual fees. Plus they can be reloaded with more money when the cash inside is used up.

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