If you’re trying to decide between a student credit card or a secured credit card, you should know that these two types of credit cards are similar but not the same. Student credit cards are typically unsecured cards that don’t require a cash deposit as collateral, while secured credit cards require a minimum deposit (usually between $49 and $200) to establish a line of credit on the card.
Secured credit cards have one advantage that makes them a better option for many people: they are the easiest to get approved for of all types of credit cards available today. Below are the pros and cons of secured credit cards vs. student credit cards, so you can decide which one is best for you.
When to choose a student card
Student credit cards are for students who want to start building credit for their future. Students tend to be approved with minimal credit history, and some issuers may approve applicants who don’t yet have a credit score.
Student credit cards tend to have lower limits and fewer perks because they’re aimed at people who haven’t yet built a credit history, but many offer no annual fee, rewards based on spending, and free credit score tracking and other credit-related tools.
Benefits of student cards
You can be approved even if you have limited or no credit history. It’s possible to get approved for a student credit card even if you have no credit history, as long as you meet other requirements that vary by card issuer.
Build valuable credit history: Student credit cards report your payments and balances to all three credit bureaus, helping you build the credit you’ll need in the future.
Earn rewards as you spend: Many student credit cards offer cash back or other rewards on every purchase, which is a big advantage for young people who are tight on cash.
Disadvantages of student cards
Not everyone looking to build credit can qualify for these cards, as you may need to prove your student status.
It may be hard to get approved if you have poor credit: Although student cards advertise easy approval for limited credit, it may not be as easy to get approved if you have a low credit score or negative information on your credit report.
Limited perks and offers: Student credit cards tend to have lower limits and may not offer as great perks or offers.
When to choose a secured card
Student credit cards are for students who want to build credit, while secured credit cards are for students and others who want to build or restore credit. Secured credit cards are easier to get approved for, so they are often marketed to people with low credit scores or bad credit due to past mistakes.
Secured credit cards require an initial cash deposit, which is refunded if the account is closed or upgraded to an unsecured account. Issuers of secured credit cards typically report card activity to credit bureaus, helping cardholders build credit by using the card responsibly. Some secured cards offer perks and no annual fees.
Advantages of Secured Cards
You don’t have to be a student to apply. Anyone can apply for a secured credit card, whether or not they’re a college student.
Build credit by using responsibly: These cards are reported to the three credit bureaus and can help build credit in the future.
Earn rewards as you spend: Many of the best secured credit cards earn you cash back on every dollar you spend.
Disadvantages of secured cards
Collateral requirements. To start building credit with one of these cards, you’ll need to put down a cash deposit.
Perks and benefits are limited. With secured credit cards, the perks and cardholder benefits are quite limited.
Your initial credit limit may be very low: The security deposit is usually the same as your credit limit, so if you pay $200 as collateral, your card may only have a credit limit of $200.
Alternative ways to build credit
If you’re having trouble deciding between a secured card and a student card and want more options, here are some alternative ways to build credit.
Conclusion
If you’re trying to decide between a student credit card or a secured credit card, you should know that both options can help you build credit. Both types of cards are designed to help you improve your credit score with responsible use and develop good habits that can help you move on to cards with better perks and rewards.
The key to taking advantage of secured credit cards and student cards is to keep your debt low and always pay your monthly balance on time, and preferably in full. Doing these things will help improve your credit.
*Information about the Petal® 1 “No Annual Fee” Visa® Credit Card was collected independently by Bankrate. Card details have not been verified or approved by the card issuer.
