Are Student Credit Card a way to Debt Trap?

The credit card journey began in 1950 when Diners Club introduced the world's first credit card. In subsequent years, its popularity exploded. Initially maintained as emergency funds or as cashless payment options, today, they continue to exist as an avenue for short-term borrowing. However, they also became the face of debt for several people worldwide. 

Yet, credit cards are not the nightmare inventions that movies portray them as. They have evolved significantly over time. Various offers, interest rates, rewards, and repayment options have proven to be a saving grace—especially for students studying abroad. Subsequently, the late 2000s saw the advent of student credit cards. 

Student Credit Card

Initially, the primary purpose behind the invention of a student credit card was to help young adults build their credit histories. As a student, you could secure a degree and a credit history. Over time, this type of credit card found its way into being an ideal choice for students studying abroad as well.

With 1.13 million Indian students abroad as of 2021, and the number expected to grow beyond  1.8 million soon, a credit card for college students becomes the ideal way to tackle unexpected emergencies or daily expenses. 

However, student credit cards aren’t a relatively new concept in India. Various banks and states like West Bengal are launching and promoting them earnestly. But can anyone get a student credit card? What are the eligibility criteria? What is the student credit card application process? Read on to find a complete guide on student credit cards and whether they are the right choice! Apple Music can only be accessed by Credit card  (Just saying).

Features and benefits of student credit card

You may think, “What are the benefits of a credit avenue that could lead a student to debt early on?” While the key to avoiding debt is proper financial planning and discipline, these credit cards have some great features that ensure you don’t fall headfirst into indebtedness and provide additional benefits. I wonder what Vijay Mallya was like in his student years… What if college time debts were what he practised with?

Credit Limit: Most student credit cards have a limit of Rs. 15,000, explicitly ensuring that you do not accumulate debt as a student. 
Minimal documentation: Considering the documentation process for regular credit cards, credit cards for college students do not require many documents. Simple identity and income proof will suffice. However, you must check with the bank before applying.
Duplicate card free of cost: Let’s consider you’re having a good time with your classmates, and you are generous enough to pay the bill. But, on your way home, it falls out of your pocket. Generally, banks would charge a fee to reissue a regular credit card; however, this does not apply to student credit cards.
Special deals and rewards: Like the familiar adage—every penny saved is a penny earned—student credit cards offer cashback for each penny spent. Numerous banks offer exciting deals and cashback to reward each expenditure.
Card Validity: Student credit cards possess more extended validity periods of approximately five years than regular credit cards that are issued for a maximum of 3 years. 
Credit history: The Original reason behind the invention of the student credit card is to build a good credit history. These cards allow you to create a financial reputation for timely repayments as they expand your borrowing options when you need a car or home loan, letting lenders know they can trust you.
No joining or annual fees: When you acquire a student credit card, you do not need to pay the joining fee or annual membership fees, which apply to other types of credit cards. This feature makes it an economic credit option. 
Instils financial discipline: The power of financial discipline is vital as you step into the real world. Each month, you receive a credit card statement which you must repay or face penalty charges that add to your due amount. However, if you repay it on time, you are free from debt and accumulate reward points through vouchers or cashback.
Convert to a regular credit card: Once you graduate or begin your dream job, you can convert the student credit card into a regular one with a higher credit limit based on your income and credit score, though you may lose the benefits of a student credit card. 

Different types of student credit card in India

Since the inception of student credit cards in India, many financial institutions have begun providing this credit option. However, below is a list of some of the most popular credit cards for college students.

1. SBI student credit card
SBI’s Student Plus Advantage card is one of the most popular student credit cards that provide many financial benefits. This Visa Student Credit Card possesses a list of features that include:

• No annual or joining fee
• Balance transfer from another credit card
• Low-interest EMIs (2.25%)
• 10x rewards points on International transactions
• 2.5% value back on utility purchases
• 2.5% fuel surcharge waiver across all petrol pumps in India
• One reward point for every Rs 100 spent

However, the only caveat to this student credit card is that SBI issues these cards to those who have taken an educational loan from the bank. An alternative route to avail of this credit card would be to open a fixed deposit with SBI with the eligible amount to qualify. 

2. HDFC student credit card
There are two options for HDFC student credit cards within its series.

a. HDFC Bank ForexPlus Card

This card has been the superior option for students studying abroad as it provides easy access to multiple currencies to execute transactions seamlessly and hassle-free. 

Furthermore, the currency rate fluctuates frequently. The ForexPlus card provides flexibility and protection as you can deposit the money in the card in all major foreign currencies and protect yourself from exchange rate fluctuations. It is also an affiliated Visa Student Credit Card.

Its additional benefits include free insurance coverage, emergency cash withdrawals, chip-based security and deals on food, books, and accommodation in 130 countries.

b. HDFC Multicurrency Platinum ForexPlus Chip Card

This card offers easy access to funds in 22 foreign currencies. You can manage the currency exchange through the card and add funds through secure online wallets. Its additional benefits include

• Fraud and accident protection up to Rs. 5 lakh each
• Account tracking
• Execute net banking transactions
• Protection against currency fluctuations
• Special discounts and deals with each transaction

This card is ideal for students with multi-destination travel needs, that require them to carry several currencies in one card.

3. West Bengal student credit card
On June 30, 2021, the Higher Education Department, Government of West Bengal, led by CM Mamata Banerjee, introduced the West Bengal Student Credit Card (WBSCC). The primary aim was to facilitate students to pursue further education without financial constraints. Irrespective of the geography where you wish to pursue your education, you can apply for this scheme. The initiative saw over 26,000 applications on the same day. 
Students in class 10th can apply for a loan of Rs 10 lakhs maximum that does not require any form of collateral and includes an interest rate as low as 4%. These loans will be sanctioned by the State Cooperative Bank and its affiliated banks. The payment duration spans 15 years, with the eligible age being 40 years old at the time of loan application. 

To apply for the WBSCC, follow these steps: 

1. Visit https://wbscc.wb.gov.in/
2. Click on ‘Student Registration’ and enter your relevant personal details, preferred ID, and password.
3. Click on Login and enter the credentials confirmed previously.
4. Submit the relevant documents as prescribed in the form.
5. If the documents are correct, you will receive your loan amount.

CM Mamata Banerjee recently distributed over 5000 student credit cards to boost this initiative and urged banks to step up and provide loans under this flagship scheme. 

4. Axis Bank Student Credit Card
Like SBI student credit cards, Axis Bank’s Insta Easy Card approves these cards for students with a minimum fixed deposit of Rs. 20,000. 
The credit limit of this Axis Bank student credit card is set to 80% of the fixed deposit value, thereby providing you with funds higher than the general limit of Rs. 15,000 established by many other banks. Furthermore, you can make cash withdrawals up to 100% of the credit limit. 
Other exciting benefits of this card include the following.

• Up to 15% discount on meals at allied dining outlets
• 1% fuel surcharge waiver in India
• Convert transactions to EMIs
• Secured platinum chip card

Student Credit Card Eligibility

Banks have made the entire approval process for student credit cards straightforward to ensure the maximum availability of such options to students in need. While the student credit card eligibility and documentation process vary from bank to bank, here are the essential criteria.

Eligibility

• The applicant must be above 18 years of age
• The applicant must be a college-going student

Documents Required

• Birth certificate
• Identity card issued by the college/university
• Proof of residential address
• Recent passport-size photograph
• PAN card

How to apply for a student credit card 

Considering the universal fact that credit cards require income proof, how can you qualify for one as a student? As most students have no income and may need funds during emergencies, banks have specifically introduced student credit cards. Thus, the application process also includes specific alternatives that are not income-linked. Here are a few options after taking permission from your parents.🤭
1. The secure way
This route includes surrendering an asset in exchange for credit. If you have a Fixed Deposit in your name, you can get a student credit card by pledging it as collateral. However, some banks set the bar for the minimum fixed deposit amount against which you can acquire a student credit card.

2. The supplementary way
Most banks have an option of an “add-on” card. You can request a family member with an existing credit card to apply for an add-on card in your name through this route. However, they must possess a good credit record to qualify for this alternative. 

3. The unsecured way
If you apply for a student credit card with an existing savings account with a good income flow and credit history, you can leverage it to apply for a student card. However, you must check whether your bank provides such an option.

Student Credit Card Application Proces Online

The advent of technology has facilitated ease of transacting and borrowing. Similarly, you can apply for a student credit card online by visiting the official website of any bank that offers such a credit option. The student credit card application process varies with each bank. However, the basic steps include the following.

• Navigate to the respective webpage on the bank’s website. 
• Fill out the student credit card application form.
• Submit your documents.

Once approved, you will receive your student credit card at your doorstep! To check the status of your student credit card, log into your net banking account. In the case of an add-on card, visit the primary cardholder’s account.

The Bottom Line 

Evaluating the wide range of benefits provided by student credit cards, it is worth considering them as financial options to fulfil your academic needs in India and abroad. However, you must be prudent with your spending and gain the financial discipline necessary to avoid debt.
Before choosing a specific bank for your credit card, consider all the available options to ensure they suit your needs and repayment capacity.  The student generally doesn’t have liquid cash, so it’s a great way to make a transaction, but it’s also a way to get into a debt-web.