I'm in School. Should I Get a Credit Card?

Here are four advantages of having a credit card for a student:

Improves short-term liquidity

Perhaps the most important benefit for students is the ability to improve liquidity in the short term. If you work only part-time and your hours vary from week to week, you may run out of money to cover expenses such as rent, textbooks and transit passes. By following the golden rule of only using your credit card for purchases that you can pay in full when you are charged, you will avoid paying expensive interest charges.

Offers protection for the consumer

Credit cards offer protection for consumers. For example, if you buy school equipment such as a laptop, you usually receive an extended warranty at no extra cost. However, some credit cards have a fee for this coverage, so it is wise to check if the card you are considering getting the offer for free. If you plan to travel during the summer, many credit cards offer travel insurance.

Paying with the credit card is usually much safer than paying cash. If you buy a ticket for an event and it is cancelled, you can contact your credit card company and ask for a refund (by paying cash, you probably won't see the color of your money again).

Helps build a strong credit history

If you want to borrow money for a major purchase like a home or car, building a solid credit history is essential. This is even more important for students who typically have little or no credit history. Lenders will be reluctant to approve a large loan if you do not have evidence that you are paying your bills. Getting a low-limit credit card and paying your balance on time regularly will help you build a solid credit history that could improve your credit score.

When you get your first credit card, it's important to use it responsibly. This means buying only what you can repay in full. Deferring a large balance or worse, not paying off the outstanding balance can lower your credit score.

Builds discounts on your day-to-day expenses

Credit cards are a great way to earn discounts on day-to-day expenses. Depending on your credit card, you can earn cash back, loyalty points or travel rewards. Consider choosing a credit card that offers the type of rewards you enjoy the most. For example, if you travel often, get a travel rewards credit card. If cashback is more important to you, there are several choices of discounted credit cards available to you. Consider a credit card with no annual fee, as fees are generally not worth it for students who spend little.