The prepaid debit cards and the student credit cards are types of cards which a student may choose to help them regarding there schooling. But the question is, which among the two cards should a student choose? How does prepaid debit card differ to a student credit card? Having knowledge about this two options may actually help you decide and come up with a sound decision. Read more to find out.
The Unsecured Student Credit Card
An unsecured student credit card works like any regular credit card. A credit line is also given to a student, this only mean that he can charge some expenses on his card just as long as he don’t go beyond his limit. Some student credit cards give a credit limit of $500 while others give a $1,000 credit line. Since this their first time applying, the credit limit given to students are often lower than those allotted to long time credit card holders.
Nevertheless, getting a student credit card is a good way to start building your own credit history while still in school. In fact, being in a college is the only time you can apply for an unsecured credit card without difficulty. Once you’ve graduate, lenders and credit card companies would often require a good credit history to approve your application.
Although not all student credit cards give a low credit limit, this restriction can work to your advantage. Maintaining your credit within the limit will help you avoid the risk of putting yourself in a very large debt. Remember, as a credit card holder, you should do your best not to exceed beyond 50% of your allotted credit.
The Student Prepaid Debit Card
Now let’s talk about the student prepaid debit card. It may look like a credit card and it can actually be used to pay for your purchases just like a credit card but it is different in some ways. How? Instead of a line of credit, you’ll need to deposit money in your account first in order to use the card. If you don’t have existing funds in your debit account, you won’t be able to use the card for payments.
Some parents prefer to give their college student a prepaid debit card instead of a credit card to avoid the risk of uncontrolled spending. There are prepaid debit cards today that do report to the credit bureaus, so you can still build your credit history using these cards.
However, the disadvantage about prepaid debit cards are the costs that comes with it. For instance, each time you use your debit card for payment, you are charged with a transaction fee. At the end of the year, you are required to pay a free for your card to stay active. However, if you do your research well, you can find debit cards with reasonable costs and charges.
Which is Best?
Being a credit card holder comes with the responsibility of submitting your monthly payment on time. While a debit card frees you from this obligation, it does have its limitations. For instance, you may not be able to use your prepaid debit card on an emergency if you didn’t place funds in your account. Thus, making the choice is up to you.
If you do decide that you prefer a prepaid debit card over a student credit card, make sure that your debit card issuer will report your payments to credit reporting agencies otherwise you won’t be building your credit history at all.
On the other hand, if you choose a student credit card, see to it that you are up to the challenge of keeping up with your payments. Always remember that it is not enough that you have established a credit history. Instead, you should strive to build an excellent credit and keep it that way.
Author-Bio: Tara Tiemann is a credit analyst of http://go-prepaid.com and has been a resource site for people who want to live debt free! If your on a budget using pre-paid credit cards and pre-paid cell phone services can save you big money!
