Students often face difficulties when trying to obtain their first credit card because they have no previous credit history and no permanent job-related income. Their young age also counts as a disadvantage in the eyes of credit card companies.
In Canada, students must have reached the age of majority applicable for their province of residence to be eligible for a credit card. At present this age is either 18 (e.g. Manitoba, Alberta, Ontario, Quebec, Prince Edward Island) or 19 (New Brunswick, British Columbia, Northwest Territories, Newfoundland and Labrador, etc.) This fact suggests that only college and university students can be approved for a personal credit card, i.e. one which does not have to be signed by a parent or guardian.
The best place for students to apply for a credit card is the bank which they use for their regular financial transactions. Banks are less averse to approving an applicant if he or she also happens to be one of their customers. In most cases, the student will have to submit the application in person at a local branch, but there may also be an option for online or mailed-in application. If you apply and get rejected, do not despair – visit your bank, bringing your student ID with you, and ask if they can’t do anything else for your application. You may also inquire about other financial products intended for students.
Regardless of where you choose to apply for a credit card, you should be fully acquainted with the card’s characteristics. Pay particular attention to the following features:
– Annual Percentage Rate (APR)
This is the interest rate at which you will be charged during the calendar year. Many companies have low to no introductory APR, but they will increase the rate, sometimes considerably so after the initial promotional period expires. Make sure you understand both APR values, how the company calculates them and for what types of transactions they apply.
– Annual and Other Fees
Typically, credit card companies collect an annual fee for servicing the card account as well as different fees for the performance of each transaction with the card. Inform yourself about these before you apply for a credit card. Ask a company employee for an explanation if there is something you do not understand.
– Credit Limit
The credit limit is the amount you will be allowed to spend over a certain period of time. For student cards, it is usually between $500 and $1000, which is a bit low in comparison to the other credit cards, and can be increased only after you have made at least a couple of monthly payments.
– Rewards Program
Some companies offer card holders participation in rewards programs which allow them to redeem part of their card expenditures in the form of various bonuses (from groceries to airplane tickets). Most institutions do not offer first-timers such rewards, but it won’t hurt to ask when you make your application.
– Credit Score Contribution
You credit score and credit history will be very important later in your life when you want to apply for a house mortgage or take a car loan.
In general, products by national credit card institutions have a better effect on a person’s credit score, compared to local companies. For this reason, given the right to choose, it is always wiser to pick a credit card offered by a larger institution. And in any case, make sure you always pay your debts on time because only then, you will be able to maintain a good credit score.
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