Credit card is actually a very good way to start building credit history. Although it is being criticized being a spoiler, but still offers benefits which can fulfill anyone’s future aspirations.
For e.g. if you want to buy a home and request bank for a loan then depending on your credit history, the loan will be approved or rejected and loan amount would be decided. So building a credit history is very important and is possible only when someone has taken credit from financial institution.
The early you start working towards building a credit history, better are benefits in the later part of your life. This is the reason credit card is a stepping stone to build credit history for every earning individual or with no income source. This includes students as well. Although credit card for students is not recommended but from a future perspective, it is good for a student to have a credit card provided the usage is wise.
But in India (infact across the world), income is one of most important criteria considered by the bank before approving a credit card. This is the reason credit card for student with no income in India is extremely difficult. Because an individual with no income has no way to prove his/her credit worthiness.
So can an Indian student get credit card?
Answer is YES. Students in India can get plastic money through two different ways as follows:
Against fixed deposit:
It is actually a secured credit card in which the FD account plays the role of security with the bank. Parents can open fixed deposit account in the name of student and then apply for credit card against the FD. The biggest advantage is that, deposit in FD is not very high.
Listed in the below are few credit cards against fixed deposit and the minimum amount required:
|Sr. No.||Credit Card Name||Minimum Fixed Deposit Amount Required||Issuing Bank|
|1||Signature||Rs. 10,000||Andhra Bank|
|2||Payless||Rs. 15,000||Development Credit Bank|
|3||Aspire||Rs. 16,000||Central Bank|
|4||Coral||Rs. 20,000||ICICI Bank|
|5||Instant Platinum||Rs. 20,000||ICICI Bank|
|6||Insta Easy||Rs. 20,000||Axis Bank|
|7||Assure||Rs. 25,000||Bank of Baroda|
|8||Usecure||Rs. 25,000||Union Bank of India|
|9||Unnati||Rs. 25,000||State Bank of India|
|10||Solaris||Rs. 25,000||Kotak Mahindra Bank (ING Vysya)|
|11||Aqua Gold||Rs. 25,000||Kotak Mahindra Bank (ING Vysya)|
|12||Advantage Plus||Rs. 25,000||State Bank of India|
The credit limit is calculated on the basis of the amount kept in FD and is typically 80% – 85% of the FD amount. Higher the amount, higher would be the limit.
If the parents or elder brother/sister is already using a credit card with excellent track record of repayment then they can apply for add-on card. These supplemental cards are offered to select customers only. But key points to remember are:
- If there is a default in the payment, then the primary card holder is held responsible and their credit history gets impacted.
- Primary card holder will have to pay any balance amount, if the add-on card holder makes default.
- Credit limit is split between primary and secondary card.
If student is earning but has low income then there are many cards for such low income earners.
Credit card exclusively for students:
- SBI Student Plus Advantage Card is one such card offered by State Bank of India but only to the education loan customers. This card has zero annual fee and offers easily encashable cash points which are redeemable at the time of paying the outstanding balance. One cash point is earned on spending Rs. 100.
- ICICI Bank Student Travel Card: Best recommended for someone going abroad for studies. When used abroad student can start building credit score in foreign country which will help him/her in getting credit card from foreign banks
- HDFC ForexPlus Card: Again recommended for students who would be transacting in multiple currencies. E.g. if a student is pursuing education in USA and UK or any other country. The money is directly debited from the card account.
Advantages of giving credit card at an early age to students:
Anything used wisely will reap benefits. And same holds true with credit card. If used honestly within the limit and balances are paid on time and fully, you can get range of benefits such as cash points, rewards points, fuel surcharge waiver and others.
However there are other benefits for students using credit card as well:
- Right from young age they can start building credit history
- Spends can be tracked easily
- Aids in learning money management skills
- It makes them a responsible individual as they can monitor their expenses and then stop them from making unnecessary purchases.