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Best Student Credit Cards & Tips For Smart Credit Use

During a recession, the flow of credit tends to tighten up as banks and lenders take fewer “risks.” The result of this is that people who are credit-worthy but have no credit history, such as students, are caught in the middle. Without a credit history, they can’t get credit cards and loans. With credit cards and loans, they can’t establish a credit history.

An old standby practice, piggybacking, was recently eliminated as the new FICO score rules changed how it treated authorized users. In the past, someone with poor or no credit could “piggyback” as an authorized user on an account of someone with good credit. Many parents put their children on their credit card accounts to help them establish credit, the parents were “co-signing” their child’s debts, so it was perfectly acceptable. Unfortunately, people started abusing this and selling “authorized user positions” on their accounts, some for as much as $500 or $1,000 a piece, so FICO had to respond.

Fortunately, credit card companies recognize that students have credit needs and are often supported by their parents, so they’ve created student credit cards that low limits, reasonable rates of interest, and looser credit requirements. Companies like Discover and Citi have always been in the forefront of this and my first credit card was one issued by Citi based solely on my income being defined by my tuition payment.

The most important thing to realize, whether you’re the student or the parent of a student, is that a credit card should not be taken lightly. A lot of students fall into the trap of not recognizing that credit is still money and that you shouldn’t be spending money that you don’t have. I think having a credit card is important, getting one is one of my 40 college money tips [3], but fiscal responsibility is far more important. One of the great things about student credit cards are that the limits are low but you can still fall very deep into debt. Only spend that which you can repay within the grace period and never carry a balance. If you don’t think you can do that, avoid these things at all costs.

Here are some other tips for smart credit use: