Playing the right card
Post-secondary students would do well to get a credit card. Just ensure it’s of the no-annual-fee variety
As university and college students’ classes get underway, one choice to consider is whether to get a credit card.
Post-secondary students probably should. Credit cards are practical and useful and managing them is a fact of life.
The sooner young adults learn to use one responsibly and begin building a credit history, the better.
There are advantages to getting a card off-campus — it avoids the pressure of a campus kiosk. It also gives students a chance to talk about credit with their parents and allows plenty of time to ask the right questions of lenders.
Worried parents who are asked to cosign can keep the credit limit low until they’re confident their child can handle it.
Lisa Jackson, managing editor at the Young & Thrifty blog, agrees with the idea that college and university students should get a credit card and learn to use it responsibly.
“It helps you build your credit history — which will benefit you later on if and when you apply for a mortgage, a loan, or even an apartment rental,” Jackson said.
But there are more tangible reasons, too: Many credit cards include travel insurance or car rental insurance as part of the package, as well as purchase protection and extended warranty protection. So if your iPhone suddenly dies or if your flight home for the holidays is cancelled, these perks could save you
some serious cash.
“Plus, since you’re spending money on school supplies, groceries and a cellphone plan, why not get a credit card that offers cashback or rewards? You might as well get something back from the expense,” Jackson said.
The major caveat is that credit card interest can be 18 per cent or more, so paying off the balance in full and on time is key to being a responsible cardholder.
The best deal for students is a credit 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 only a few stand out. Here are three of Jackson’s favourite student credit cards: Tangerine Money-Back MasterCard: A great option for students, it has no annual fee, no limit on the amount of cashback you can earn and the payout is monthly instead of a year for some cards. As a cardholder, you choose two categories on which to earn 2 per cent cashback ranging from groceries, gas, drugstore purchases, recurring bill payments, public transportation and others. You get 0.5 per cent back on all other purchases. Tangerine will give you a bonus 2 per cent category if you automatically deposit your cashback rewards into a Tangerine Savings Account.
BMO CashBack Master
Card: Again, this is a no-annual-fee card. New cardholders get 5 per cent cash back in their first three months. After that, you’ll earn 1 per cent cash back on all other card purchases. The rewards program is flexible, too: You can redeem the cash any way you like, whether it’s depositing it into your chequing account or using it as a credit on your monthly statement. This card also offers purchase protection and extended warranty on most items bought with your card. Scotia Scene Visa Card for
Students: What student doesn’t love going to the movies? This no-annual-fee card starts with a welcome bonus of 1,250 Scene points (enough for one movie ticket), and pays 1 Scene point for every dollar you spend, plus five Scene points for every dollar you spend at Cineplex theatres and cineplex.com.
Student credit cards that come with an annual fee should be avoided — no matter what kind of perks they include. Students simply don’t spend enough for the rewards to offset the fee. Not everyone can manage credit responsibly at a young age…especially when temptations to dip into the balance for weekend road trips and concert tickets abound. For those cases, a prepaid and reloadable Visa card, such as Koho, can help students manage a balance without fear of going into debt. A prepaid card won’t help you improve your credit score, but there’s no danger of going into debt by spending money you don’t have.
One final tip: A great way to establish credit history is to put a recurring expense, such as a cellphone bill or Netflix subscription, onto your credit card and make a note to pay the card in full each and every month.
Paying off the balance in full and on time is key to being a responsible cardholder