College Students: When it Comes to Plastic, You Have Options

By Lindsay Konsko

There's no doubt about it: College life means buying a lot of stuff. You might not have considered this before, but the type of plastic you use to pay for all of it really matters. Not sure which is right for you? Take a look at the details below.

The benefits of paying with plastic
If you're one of the few young adults left out there who prefers to pay with cash, college is a great time to make the switch to plastic. Here's why:

  • Security - If your card is lost or stolen, you'll have a way to recover your funds. With cash, what's gone is gone.
  • Convenience - Constantly making stops at the ATM to withdraw cash is a hassle; with a card, this isn't a concern. Plus, getting in and out of stores is faster. You can swipe, sign and be on your way.
  • Tracking - Tracking spending is easy when you're using plastic, because you can rely on online banking. Keeping tabs on a bunch of cash transactions is much more labor-intensive.

Which types of cards are available to college students?

Now that it's clear why paying with plastic is a good choice, here's an overview of the options you have as a college student:

Student credit cards - A student credit card (like all credit cards) works by providing you with a short-term loan to make your purchases for the month. At the end of your billing cycle, you repay this loan to your credit card issuer. Assuming you pay in full, no interest charges will be assessed.

Although there is the risk you could get into debt, the major benefit to student credit cards is that they'll help you start building a credit profile. This will come in handy in a few years when it comes time to purchase a home. Plus, some cards come with pretty cool rewards.

As a result of the CARD Act of 2009, you'll probably need a cosigner get a student credit card if you're under the age of 21 and don't make a full-time income. If you don't have an adult in your life willing to cosign, you might have to choose a different type of plastic.

Secured credit cards - With this type of credit card, you'll have to put down an up-front cash deposit. You're not drawing on the deposit when you use the card; the cash simply "secures" your line of credit in the event that you default.

But, otherwise, secured credit cards function just like their unsecured counterparts. When you use one, you're tapping a line of credit, and you have to pay in full at the end of the month to avoid interest charges. Consequently, using a secured credit card responsibly will help you build a solid credit score.

Although you'll still need a cosigner to obtain a secured credit card if you're under 21, this type of plastic is much easier to qualify for. And if you make your payments on time and in full, you should be able to easily transition to an unsecured card when you're of age.

Debit cards - Unlike a credit card (secured or unsecured), swiping a debit card doesn't involve using a line of credit. This type of plastic is tied to your checking account; when you make a purchase, the amount is automatically deducted from your available balance. It's almost as if you'd paid in cash.

One benefit to opting for debit is that you don't have to jump through hoops to qualify for the card, even if you're under 21. Plus, since there's no borrowed money involved, there's no concern about getting into debt.

But a major drawback is that you're not doing anything to build your credit score. This could make getting a loan or an apartment more difficult in the future.

Prepaid debit cards - With prepaid debit, you load a specific sum of money onto the card and then draw on that sum every time you swipe the card. Unlike with a secured credit card, you're not accessing a line of credit - as a result, you're not doing anything to build your credit by using the card.

The only real benefit to prepaid debit is that you don't have to worry about overdrawing your checking account. Once you've used up the funds you initially loaded, your card no longer works. But prepaid cards can be chock full of fees. There are some good options on the market, but generally this is a high-cost choice.

Which plastic should you pick?

In general, the Nerds recommend getting started with credit while you're still an undergraduate. This will give you time to build up a decent credit score in advance of when you'll need it. If you're responsible with money, make an effort to get a student credit card - in lieu of that, your next best option is a secured credit card.

But there's nothing wrong with getting a debit card, too. This will help you easily and cheaply access cash and can serve as a back-up form of payment if your credit card malfunctions.

Still, every college student's needs are different. Evaluate your lifestyle to decide which type of card is right for your daily spending, and be sure to check back often with the Nerds for more plastic tips and tricks!

This article originally appeared on NerdWallet.