Student Credit Card vs. Student Loan – Which One Is Right for You?

This may come as a shock to you, but college students need money. I know, I know. Crazy concept. Nevertheless, it’s the truth. Most of them have a hard time paying for their expenses with the money earned from a minimum wage job, so they have to seek out student loans to get through school. If you don’t want to do that, you may consider the alternative – getting a student credit card. There are pros and cons to each option, so you need to think carefully before settling into one. Here is a quick comparison of student loans and student credit cards so you can determine which one is right for you.

Monthly Payments

With a student credit card, you will have to make monthly payments on whatever money you spend on the card. These may be as low as $15 a month, but you will have to keep up with them if you want to maintain your credit. With student loans, you can defer your payments until after graduation. Once that happens though, you will have to pay significantly more than you would on a credit card to keep your balance current. If you look at the overall picture, you will probably spend less in monthly payments with a credit card than you will with a student loan.

Credit Limits

You can get a lot more money in student loans than you can in credit card balances. A single loan may be worth $5,000, while a student credit card may only be worth $500. With this in mind, it is a lot easier to rack up high debt with loans because the values are tremendously higher. This leaves you with more money to pay back when you get out of school. In order to start your professional life debt-free, a credit card may be a better alternative.

Spending Options

In theory, you’re supposed to only use your student loans for school expenses, like books, tuition, and class fees. Nevertheless, there are plenty of students that end up taking their refund checks and buying cars or furniture they probably don’t need. If the school finds out about the frivolous purchases you’re making with your loan money, you could get in serious trouble. With a credit card though, you can buy whatever you want, whenever you want.

Interest Rates

Student loans and student credit cards both have low interest rates, so you may not have to worry about this either way. The government regulates student loans to make sure they do not cost more than a student could logically handle. Card issuers also keep their interest rates low because they know that students don’t have a lot of money. As long as you avoid cards with high variable APRs, you should be good to go.

Credit Building

You can build your credit with a student credit card or a student loan, but the second option may only help you later on. Since you’ll most likely defer the payments on your loan for after graduation, all you’ll be doing at this point is racking up debt on your credit. With a credit card though, you’ll be showing the bureau that you manage your money responsibly. This assumes you make your payments on time and try to pay your balance off quickly. If the credit card sits like a loan would, you’ll be in the same mess no matter what.

Student loans work well in certain situations, but credit cards provide smaller alternatives that are easier to pay back. The key here is to find the best student credit cards around and compare them to the different loans available. Think about all of the information above the next time you need money, and you should be able to select the right option for you.

About the Author: Heaven Stubblefield is the content director for, a site allowing students and other visitors to compare multiple credit cards side by side. To see more of her tips and tricks, check out the articles linked here.

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