Most Indian parents tend to think that giving credit cards to children, especially those who are college students or fresh graduates, is a recipe for disaster. But it is in fact quite the opposite as a credit card for a college student not only comes loaded with special features and benefits, it is also a great way for a youngster to start building his/her credit record.
Credit cards are offered to students who are 18 years or above and are pursuing higher education courses. The biggest advantage of student credit cards is that the documentation is pretty simple. All that you need is age proof, residence proof and proof of educational enrolment (the student ID card). There are essentially two categories of credit cards that students can access in India - secured credit cards, or cards that are available against fixed deposits, and add-on credit cards.
Secured Credit Cards
These are cards that are available against fixed deposits that serve as the credit line that the student uses. The advantage of secured card is that the credit limit is fixed up to 70-85 per cent of the fixed deposit amount. Therefore there are slim chances of things going out of hand, as compared to unsecured cards. Secured credit cards are also a great way for young college students to start building on their credit history and get into the habit of building and maintaining a good CIBIL score.
The other advantages of such cards is that there is either a nominal joining and annual fee on such cards and that they come with attractive rewards such as fuel surcharge waiver, cash-back in departmental stores, points on online transactions and even extra points for spends during the card holder's birthday month! Apart from State Bank of India that offers a secured card against a fixed deposit of as low as Rs 5000, other leading private banks such as ICICI Bank, HDFC Bank and Axis Bank offer such secured cards against fixed deposits that is ideal for students.
Add-On Cards
The other way to let a college student use a credit card is to hand over an add-on card. The responsibility of bill payment lies essentially with the primary card holder who is usually the parent. The parent can however set the credit limit on the add-on card and keep track of all the transactions made on this card. However, if you are a student or a fresh graduate using an add-on card that has been given to you by your parents, treat it as practice to build good credit. Make sure that you remain within 30 per cent of the credit limit that has been sanctioned to you and try and make the repayments on your card yourself. This will also be a great way to prove to your parents that you can indeed be responsible with your credit usage.
Credit usage is omnipresent in today's context and the millennials are far more conversant and comfortable with the idea of using credit. Realising their needs, banks are going overboard to catch them young and sweetening with tailor-made credit cards and innovative reward systems. Students however should not get simply carried away by the attractive offers. Instead weigh your needs and opt for a student credit card only when you are sure you are ready to handle the responsibility.
Disclaimer: All information in this article has been provided by Creditvidya.com and NDTV Profit is not responsible for the accuracy and completeness of the same.
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