#credit card for students
Why students should get a credit card
As students head to university they should consider getting a credit card to help them start building a credit history.
As students head back to university this fall, one question is whether or not to get a credit card.
They probably should. Credit cards are practical and useful and managing them is a fact of life. So the sooner young adults learn to use one responsibly and begin building a credit history, the better.
There are advantages to getting a card before the student arrives on campus, because it avoids the pressure of a campus kiosk. It also gives students a chance to talk about credit with their parent and allows plenty of time to ask the right questions of lenders.
Worried parents who are asked to co-sign can keep the credit limit low until they re confident their child can handle it.
Mostly gone are the days when students are bombarded with credit card offers as soon as they arrive on campus. This aggressive solicitation practice sometimes accompanied by free T-shirt and Frisbee giveaway along with the card has been banned in most student-controlled areas of campus.
While this has led to a reduction in the number of cards being solicited on campuses, cards that are introduced in a partnership with colleges and universities are still frequently promoted.
Brent Farrington, spokesperson for the Canadian Federation of Students. says the two largest players are BMO and MBNA.
The best deal for a student is a card that has no annual fee and rewards each purchase with cash back or discounts on things they need. The rewards should be useful, though: earning points toward a new car or a fabulous holiday might sound good, but chances of spending enough to earn the points are out of reach for most students. You d have to spend far beyond your means to get the reward.
All the big banks offer student cards, but BMO, Scotiabank, MBNA (owned by TD), and RBC have the best deals. The cards all offer a number of similar features. Most come with a high interest rate, no annual fee and the chance to earn rewards.
One card that stands out from the pack is the Bank of Montreal s SPC Cashback MasterCard. It gives 0.5 per cent cash back with every purchase, plus offers discounts at hundreds of retailers. The SPC will give you 15 per cent off at places such as Boston Pizza, Gap and First Choice Haircutters. You ll earn $15 cash back on $3,000 a year in spending, plus all the other Student Price Card benefits are include free (the SPC card, bought on its own, otherwise costs students $9).
Scotiabank s Scene Visa card also fits the bill as a no-fee card that offers useful rewards for students. You ll earn 1 Scene point for every dollar spent, plus 4,000 bonus points on your first purchase good enough for four free movies at Cineplex.
MBNA s Studentawards MasterCard is another option. You get 1 per cent back with each purchase, plus 1,000 bonus points on your first purchase and another 1,000 points each year on your card s anniversary. Spending $3,000 a year will get you $50 back in the first year and $40 a year thereafter.
Cards with an annual fee should be avoided, no matter what perks they include. For example, RBC s Signature Rewards Visa gives you 1 per cent cash back, but the $39 annual fee will offset all of your earnings and then some. RBC student banking customers can get this card free.
A better option is RBC s Cash Back MasterCard, which is a no-fee card that pays 2 per cent back on grocery purchases and up to 1 per cent back on everything else.
When it comes to credit card use especially for first-time users such as students there are certainly pitfalls to avoid. Students need to understand that credit cards should be used for purchases that can be paid off each month and they should not abuse their credit limit.
While having a credit card is a necessity for many students, the high interest rates can lead to bigger problems with debt if students aren t careful with their spending, said Farrington.