What Happens To Student Credit Cards When You Graduate?

As a college student, you may have been enticed by the offers of student credit cards. These cards often come with attractive rewards and low interest rates, making them a popular choice for students looking to build credit. But what happens to these cards when you graduate? Do they automatically become regular credit cards or do they disappear altogether? In this article, we will explore what happens to student credit cards when you graduate and what steps you can take to continue building your credit.

Student Credit Cards vs Regular Credit Cards

Before we dive into what happens to student credit cards after graduation, it’s important to understand the difference between student credit cards and regular credit cards. Student credit cards are specifically designed for college students with little to no credit history. They often have lower credit limits and may come with perks such as cashback on purchases or rewards for good grades. Regular credit cards, on the other hand, are available to anyone who meets the credit requirements set by the issuer.

Graduation and Your Student Credit Card

When you graduate from your educational institution, it is important to note that your student credit card will not seamlessly transition into a regular credit card option. In actuality, it is highly likely that the issuer of your student credit card might decide to discontinue its usage once your graduation is successfully attained.

Such a course of action is primarily driven by the fact that student credit cards are specifically designed to cater to the financial needs of students who are currently enrolled in an educational institution and may not possess a consistent and stable source of income. Therefore, as you progress beyond your academic endeavors and embark upon your professional journey, it is entirely possible that you may no longer fulfill the prerequisites and criteria for obtaining and retaining a student credit card.

To Keep or Not to Keep: Deciding on Your Student Credit Card

Keeping a student credit card after graduation can have both pros and cons. Let’s analyze them:

Pros of keeping a student credit card after graduation:

1. Credit history: Keeping your student credit card can help you maintain a longer credit history, which is an important factor in determining your credit score. A longer credit history demonstrates your ability to manage credit responsibly.
2. Credit utilization: By keeping your student credit card, you can continue to have access to a credit line. This can help keep your credit utilization ratio low, which is another important factor in calculating your credit score. A lower credit utilization ratio shows that you are not relying heavily on credit.
3. Rewards and benefits: Some student credit cards offer attractive rewards and benefits, such as cashback on purchases or rewards for good grades. By keeping the card, you can continue to enjoy these perks.

Cons of keeping a student credit card after graduation:

1. Higher interest rates and fees: Some student credit cards may come with higher interest rates and fees after graduation. It’s important to review the terms and conditions of your card to understand any changes that may occur.
2. Temptation to overspend: Having a credit card can sometimes lead to overspending if not used responsibly. It’s important to have a budget and only use the card for necessary expenses to avoid accumulating debt.
3. Limited credit limit: Student credit cards often have lower credit limits compared to regular credit cards. If you need a higher credit limit for larger purchases or emergencies, keeping a student credit card may not be the best option.

Closing a student credit card can have an impact on your credit score and credit history. When you close a credit card, it can affect your credit utilization ratio and average age of accounts, both of which are factors in determining your credit score. If you have a low credit utilization ratio and a long credit history with the student credit card, closing it may negatively impact your credit score. However, if you have other credit cards with higher credit limits and longer credit histories, the impact may be minimal.

To keep your student credit card active with minimal usage, you can consider using it for recurring small expenses. For example, you can set up automatic payments for a small monthly subscription or utility bill. This way, you can keep the card active and demonstrate responsible credit usage without accumulating unnecessary debt. Just make sure to pay off the balance in full each month to avoid interest charges.

Remember, the decision to keep or close a student credit card after graduation depends on your individual financial situation and goals. It’s

Options for Continuing to Build Credit

If your student credit card is closed after graduation, you may find yourself in a quandary about how you can effectively and efficiently continue building your credit, which is undoubtedly crucial for your financial future. Fortunately, there are a couple of viable options at your disposal that can help you bridge this gap and ensure that your credit score keeps climbing. One such option entails applying for a regular credit card, albeit this avenue might present certain challenges, particularly if you possess limited or no credit history, which can make it harder for lenders to gauge your creditworthiness.

However, there is another route you can explore – becoming an authorized user on someone else’s credit card. This entails being granted the privilege of utilizing another individual’s credit card, hence enjoying the freedom to make purchases, yet leaving the onus of making timely payments exclusively on the primary cardholder. By opting for this method, you can effectively build your credit score, provided the primary cardholder remains committed to fulfilling their payment obligations punctually and responsibly.

Increasing Credit Limits and Building Credit Post-Graduation

If you are a recent graduate and looking to increase your credit limits and build credit, there are a few important factors to consider. Here is a guide on how and when to request a credit limit increase, the importance of building an emergency fund before increasing credit limits, and responsible credit card usage and its impact on credit scores.

How and When to Request a Credit Limit Increase:

• Timing: It is generally recommended to wait at least six months after graduation before requesting a credit limit increase. This allows you to establish a solid credit history and demonstrate responsible credit card usage.
• Good Payment History: Before requesting a credit limit increase, make sure you have consistently made on-time payments and have a good payment history with your current credit card issuer.
• Contact Your Issuer: Reach out to your credit card issuer and inquire about their process for requesting a credit limit increase. Some issuers may allow you to request an increase online, while others may require you to call their customer service department.
• Provide Supporting Information: When requesting a credit limit increase, be prepared to provide information about your current income, employment status, and any other relevant financial details that may support your request.
• Be Realistic: It’s important to be realistic when requesting a credit limit increase. Request an amount that aligns with your income and financial situation. Requesting an excessive increase may raise red flags with your issuer and could potentially harm your credit score.

Importance of Building an Emergency Fund:

Before increasing your credit limits, it is crucial to build an emergency fund. An emergency fund acts as a safety net and helps you cover unexpected expenses without relying solely on credit.Aim to save at least three to six months’ worth of living expenses in your emergency fund. This will provide you with financial security and reduce the need to rely on credit cards for emergencies.Having an emergency fund in place demonstrates financial responsibility and can positively impact your creditworthiness.

Responsible Credit Card Usage and Its Impact on Credit Scores:

• Pay on Time: One of the most important factors in building credit is making on-time payments. Late payments can have a negative impact on your credit score, so it’s crucial to pay your credit card bills in full and on time each month.

Keep Credit Utilization Low:

• Credit utilization refers to the percentage of your available credit that you are using. It is recommended to keep your credit utilization below 30% to maintain a good credit

Best Student Credit Cards for Graduates

If you want to continue using a student credit card after graduation, there are a few options available. Some student credit cards may allow you to keep your card even after you graduate, but they may come with higher interest rates and fees. Another option is to upgrade to a regular credit card with the same issuer. This can be a good option if you have a good payment history with your student credit card. Additionally, you can also explore other credit card options that are geared towards recent graduates, such as the Discover it Student Cash Back or the Capital One Journey Student Rewards.

Conclusion

In conclusion, student credit cards do not automatically become regular credit cards after graduation. It’s important to understand the difference between student credit cards and regular credit cards and explore your options for continuing to build credit after graduation. Whether you choose to upgrade to a regular credit card or become an authorized user, it’s important to continue building your credit to set yourself up for financial success in the future.

Citations

• Report on the Economic Well-Being of U.S. Households