Credit card for students! Good or bad? Tell us

Dear students,

What is your take on student credit cards in India?

Do you think credit cards -- more so student credit cards -- if used judiciously can benefit you?

Or do you think owning a student credit card is a sureshot way of jumping into a debt trap?

Whatever your feel, please post your opinions at #Student-Credit-Cards

In India, the credit card market is expanding by leaps and bounds. Every week some bank or the other comes out with a new credit card to tap in on this growing industry. In fact, there is a card available for every type of customer according to specific lifestyle requirements of each customer segment. There are credit cards which cater specially to women, to professionals (eg: doctors), to travellers etc.

But, there is a segment of credit cards which is yet to be tapped by banks in India. Though popular in the west, the concept of student's credit cards is still to catch up here.

A student credit card is offered to students at college level (undergraduate or postgraduate) and has student-friendly features such as low interest rates, no income eligibility limit, no joining or annual fees, low cash limit etc.

These cards have simpler joining formalities since there is no requirement of submitting employment forms or IT returns. The only forms to be submitted include proof of residence and proof of enrollment in an educational institute.

Students who are above the age of 18 years are eligible for student credit cards. These cards are normally valid for a period of five years.

How do banks furnish credit cards to students?

As said earlier, there are not many options of credit cards for students in India. But, some of the ways in which banks are trying to extend credit to students are as follows:

1. Credit cards against fixed deposits

Generally, students are required to open a fixed deposit with the bank from which they wish to avail the credit card. Then, this fixed deposit fund is used to apply for the card. The credit limit of these cards is fixed up to the amount in the deposit.

An Indian public sector bank offers this product that allows a credit limit up to 85 per cent of the deposit amount. It also extends very low interest rates of 1.99 per cent per month.

2. Add on credit cards

Another great and cheap way for students to own a credit card is by getting add-on cards on existing credit cards held by their parents or other members of the family. The add-on cards will have the student's name and can be used as any other normal card.

Limitations

College life opens up a new world of freedom for students. While enjoying this freedom, sometimes students can be extravagant in the use of their credit cards and become spendthrifts. This can be dangerous as uncontrolled usage of student credit cards can make the students fall into a debt trap.

To avoid any such situations students should remember to be responsible while making purchases with cards. They should chalk out a well planned budget and try to remain within it to avoid unnecessary expenses. They should also make it a point to use the cards only to make important purchases and avoid impulsive purchases like expensive dresses or laptops.

If used judiciously, these cards are a great way to teach students early on how to manage their financials and build their credit history, which will help them in future.