Credit Cards! One of the things that a student will definitely have on his Bucket List. One of the major milestones for a student perhaps more important than a driving license is owning a credit card.
Credit Cards are not only an epicenter for online transactions but also a vital lifeline when you're out of cash.
After you read this article you'll get to know:
- Some basic info about credit cards
- Benefits/facilities of student credit cards
- Eligibility for applying for a student credit card
- How students can apply for credit cards (mainly for those who reside in India)
- What you shouldn't do with credit cards
So let's get started!
Brief Intro:
So what is a credit card? A credit card is almost similar to your debit card/A.T.M card. The sole purpose of a credit card is similar to a debit card i.e. money transactions without cash.
A debit card is directly linked with your bank account and can transact to a limit that your account permits or in Simple Words a debit card can only spend the amount in your total bank balance/account balance. For example, if you have Rs. 10000 in your account balance then you can only spend up to 10000 via your debit card. Nothing more than that!
Hence this limitation gives rise to a problem: Suppose you have an emergency situation where you must pay about say 15000 rupees. And you have got only 10000 rupees in your account. It now means that you can only pay 10000 rupees via cash or online from your debit card.
But a credit card has a different method/procedure. In this, the bank sets a limit on your total spendings(amount). For example Rs. 12000 or 14000 etc.
(Please note: Since you are applying for a student card and have no income source currently, you may see that the bank reduces your spending limit to a higher extent than your parent's credit card. And some sources say the max limit for a credit card for a college student is about 15000 rupees)
This amount directly gets deposited right into your card and has nothing to do with your bank balance. Or if I have to say in another way, you can spend more than how much you have in your bank account! Whoa, sounds great right?
Benefits or Facilities of Credit Cards for College Students:
Since this credit card is dedicated to students, the process of approval is a lot fast and also doesn't require too many documents. So what are the benefits?
- No income source is required (Since you are a student).
- Increases your Cibil score. (Also known as Credit score). Right now all you need to know about the Cibil score is that the higher the Cibil/credit score the more success rate of getting any loan from a bank.
- Fewer documents to submit. (Unlike credit cards for your parents which requires too many documents)
- You can avail the Irresistible credit card offers on popular E-commerce stores like Amazon, Flipkart, Myntra, etc.
- Reward points from the bank will be very beneficial.
- Most of the student credit cards have a validity of 5 years unlike the regular credit cards of your parents which usually have only validity of 3 years.
- The student credit card will have the same power to spend when compared to a regular credit card.
- Another big advantage of a student credit card is you don't have to pay any annual fees for your card which for a regular credit card is more than 500 rupees.
Now I know you're really excited to go and get that shiny credit card right away. But before you leave this page, take a min to read the criteria followed by the majority of the banks to issue a credit card for you.
Do you know how does the bank set the limit on your credit card? It has some parameters or criteria or requirements that you need to fulfill. Based on your ability (mainly your salary) on how much you can pay back in what span of time whatever you've spent is one of the main requirements that a bank first scrolls its eyeballs on.
But You are a student, right? So what does the bank do? The answer is given below:
Eligibility while applying for Credit Card for a college student:
- The student must at least cross the age of 18. (Note: If you have just crossed 18 but are still in your intermediate (Class 11/12, P.U, +1/+2), you cannot apply for credit cards. You must first get admission to a college where you do your Graduation. If anyone in your family or you have applied for an education loan then you can apply for a credit card from the bank.
- If there is already a credit card holder in your family then you can also apply for a student credit card on his behalf.
- If the bank in which you have an FD(fixed deposit) or any scheme investment has an option for applying for a student credit card then you can also apply there. The credit card limit will be set to the amount near what you have in your fixed deposit(FD).
- One point that I will definitely mention here is that some or perhaps most of the banks will have a requirement mentioning you must have an education loan/fixed deposit(FD)/sometimes savings account in the bank where you apply. Hence please first ask all the criteria based on which you can fulfill them.
- Document Criteria:
1. Birth Certificate of the student
2. College's ID proof
3. PAN card
4. Address proof (You can submit your Adhaar card for this category)
5. And finally, a Passport Size photo that you have taken recently.
How to apply for a college student credit card:
The first thing I recommend is that you go to the particular bank's website and search there for credit cards or simply type in Google the particular bank's name and consecutive to it type student credit card.
From there 99% I am sure you will get to know whether you can apply online or you have to visit the nearest branch to apply.
Popular banks that offer credit cards for college students:
Some of the banks in India that offer credit cards for college students are:
- State Bank of India
- ICICI Bank (Known as travel card which may have annual fees)
- HDFC bank
Note: We do not know exactly what features or terms a bank has while giving a student credit card.
Hence, as a responsible student, please enquire about all the features, terms as well as pricing before applying for a student credit card if the bank has an option to apply.
All right, by now you have come to know:
- Some basic info about credit cards
- Benefits/facilities of student credit cards
- Eligibility for applying for a student credit card
- How students can apply for credit cards (mainly for those who reside in India)
So now let's have a look at what you shouldn't do when you are having one or else you may risk losing it or getting it terminated by the bank:
What you shouldn't do with your credit card:
- Never miss a payment
Paying off your credit card bill in time is very essential otherwise you will be charged interest over time. Meaning you will have to pay extra than what you have spent on your card. However, sometimes due to some emergency you cannot do so. But avoid delay in paying off your credit card bills or at least the minimum payment if the bank has the option of it.
- Avoid charge offs at any costs
Now, what is a charge off? It usually occurs after 180 days of not paying your bills (your spent money). Not only it will cause your credit score to fall but also most of the time leading to the termination of your credit account by the bank.
Even worse, the bank may sell your debt to a debt collection agency that has the sole job of reminding you of your debt from the bank (credit bill) through phone calls, emails, messages, and whatnot. Often it is enough to ruin your day and keep you irked.
Another huge disadvantage is the charge-off will remain on your credit report for 7 long years and this will affect your chances of getting another credit card or personal loan or mortgage adversely.
- Never take out/withdraw hard cash from an ATM with your credit card
Taking out cash from an ATM with your credit card is definitely something that is not at all recommended.
Use a debit card instead or borrow money from anyone in your family.
The reason credit card companies don't like you to withdraw cash or cash advances is that they don't know where the cash is going or in simple words, they are afraid of any malpractice occurring by that cash. Example: Using that money to buy something illegal, etc.
So what they do is put a soring interest in your next credit card bill. I am talking about more than 20 percent!
Also not only the bank but if you're using an ATM of another bank that too charges you for using it. Plus, your bank has some extra fees with each cash advances you do.
So, cash withdrawal in a credit card (cash advance) is a big no-no.
- Never Max out your limit
It is recommended that you should only use 30% if not up to 50% of your limit. Why so? Spending nearing the limit of your credit card causes a sheer drop in your credit score which is not a good thing. Also, heavy spendings put your account on a financial review from the bank which may include messages from the bank or majority of the cases a phone call from the bank.
So if you find out your credit utilization is pretty high then you can use these four methods to sort it out: (Applies for regular as well as student credit cards)
1. Spend Less
2. Ask for an increase in your credit card spending limit
3. Open a new credit account
4. Pay Card before the statement closes
- Never add a person as an authorized user whom you don't trust much
What can an authorized user do? He will be given a physical credit card from which he can make purchases on your account. Now that can be a family member or anybody else.
The catch here is that you sign a contract with the bank which says that you are legally responsible for all the spending on your credit card which means you cannot file a case against that person in the court/judiciary because you have okayed the contract that you are liable/responsible for the charges in your credit card bill, not him.
So if the charges are unpaid it will affect your credit score.
- Inform the bank if you are using the credit card abroad
This is a crucial thing to do if you are using your credit card in a foreign country. Informing a bank in advance will help in not getting your credit card blocked by the bank thinking it's a fraud. And nowadays it's very easy to inform the banks online. Or you may have to phone the bank before you leave the country and use your credit card.
Note: Just go through the bank's policy on foreign transactions to have better clarity when you're spending abroad.
- Don't opt for a credit card if the transaction has extra fees
It's better to look out for other forms of payment probably cash if the transaction you're doing has some extra fees. Well, if you want to achieve some spending target for a reward, you can do it.
- And the final thing: Don't share your OTP, CVV, card number, or cardholder name with anyone
Come on, it's an old thing. So I will not waste your time saying that again. You are a wise user. Aren't you?
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Conclusion:
Credit cards becoming the boom of the modern financial world, it's good to have one if you are a responsible user.
Because I don't think anyone wants to invite trouble by misusing a credit card. This article mainly focused on what is a credit card, how is it different from a debit card, the benefits of credit card for college students, common criteria banks follow to issue a student credit card, some popular banks in India that have a facility of credit card for students, and what you shouldn't do with a credit card.
Hope this article helped you a lot. Leave a comment below. Tell us your suggestions. And if you found any info is incorrect, please feel free to mention it in the comments.
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