Student or Secured Credit Card

by : Keith Adams

If you're looking for the right credit card, you've no doubt noticed that there's a dictionary's worth of terminology involving them. Two terms that cause a lot of confusion for young people are "student credit cards" and "secure credit cards". What are they? Is there any difference between the two? Which one is best for your budget and lifestyle? Here's a quick rundown:

A student credit card is just that: a credit card aimed at students. Basically, student credit cards are no different than regular ones, except that they're marketed specifically to students, sometimes "branded" with cool logos and such. HOWEVER, be careful when choosing a student credit card because some of them carry a high interest rate and fees, which could be a problem if you're living on a tight budget.

At the same time, some experts recommend that students who don't yet have a credit history should start out with a card that offers an APR (Annual Percentage Rate) of about 16 to 17 percent or lower, although many credit cards offer special introductory rates such as 0 percent for the first 6 to 12 months. Just remember to stay away from cards that offer an APR of 20 percent or higher.

On the other hand, secured credit cards require a deposit from the account holder as a form of collateral. This deposit is put into a savings account, and the card's limit usually equals the deposit amount. In this sense, a secured card is somewhat similar to a debit card. But again, some secured cards can have high annual fees, and can come with higher interest rates.

The benefit of using a secured card is that you don't have to worry about owing money that you can't afford, since when you make purchases, you're only withdrawing from money you've already deposited in the account. As a result, you get the benefit of building your credit like you would with a regular card, but without the potential negatives. At the same time, you also have to be consistent in paying any monthly charges on time. Otherwise, the balance on your security deposit could end up being used to pay any outstanding interest charges, which could be a negative strike against your credit.

In the end, both student and secured credit cards have pros and cons. It may seem like a pain, but research pays off. Do your homework while looking around for the right card and you can reap rewards in the form of lower interest rates and annual fees.