Student Credit Card Mini Tutorial

What is credit?

Credit is a contract based on your promise to pay in the future for goods and services you receive today.

What types of credit exist?

- Two basic types of credit are secured and unsecured. Secured credit means that the product you purchased, such as a car, appliance or furniture, serves as collateral to guarantee the debt. If you do not make a payment, the creditor can legally take possession of the product.

- Unsecured credit is based on your promise and signature to repay the debt without committing your savings or other collateral as a guarantee.

Credit cards can be either secured or unsecured, but most credit cards are unsecured.

How can you obtain a credit card?

If you have not established credit, several options can help you obtain a credit card:

- Have a parent or legal guardian arrange for you to have a supplemental card. Your card will be billed to their credit card account.

- Have a parent or legal guardian cosign your credit card application. If you are unable to pay the monthly bill, then your parents must assume responsibility for the repayment.

- Open a saving and/or checking account at a bank or credit union and agree to maintain one month's credit limit in a savings account. Then if you do not pay your monthly payment, the bank will remove the money from your account.

What kind of credit cards are available?

- Travel and Entertainment cards, such as American Express or Diner's Club. They are usually not available to students because they are used by businesses and consumers for travel and entertainment expenses and have an annual fee.