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There are two types of cards that students can choose to help them with their schooling- prepaid debit cards and student credit cards. Which of these two cards should you choose? What are their differences and how should they affect your choice? Understanding the basic points about these two options can help you come up with an informed decision. Here's what you should know. 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. As a holder of a credit card, you must always put in mind to do your best, to not exceed beyond the alloted credit of 50%. 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. Copyright (c) 2009 Tara Tiemann
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