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A student's guide to credit

By Vanessa Page

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Although many university students have student loans to cover shortfalls, others will need to rely on lines of credit and credit cards to pay for tuition, necessities, entertainment and other costs.

With credit cards' high interest rates, though, it's important to use credit responsibly.

A 2015 survey by the Canadian University Survey Consortium found 92 per cent of graduating university students had at least one credit card. Of those, 77 per cent claimed to be repaying their balance in full every month. Of the remaining 23 per cent, the average credit card balance at graduation was $2,224 - or about a third of a year's tuition.

Using credit as a student isn't something to shy away from, though. student-guide-to-credit

Focus on card rewards - and building your credit
One thing that draws students to credit cards is the perks offered by certain cards. For instance, students who travel internationally or who frequently leave the university's province could be interested in travel insurance features or travel rewards.

Barry Choi, money expert at, however, recommends students choose a no-fee credit card, and one with immediate advantages. Although perks are nice, students will be better off with a card offering cashback or free movies - rewards useful today, instead of in the distant future.

Beware cards marketed to students, too. Choi says these cards often have the same interest rates as regular cards, offering little advantage.

Using credit cards responsibly is a perk in itself, as it helps establish a credit history, says Choi.  This history is an integral part of your credit score, and "having a good credit score is vital if you plan on getting a loan in the future," says Choi.

Beginner credit card tips
To keep your score in good shape - and avoid costly interest charges - Choi recommends paying the balance in full and on time every month.

Deborah McMillian, founder and CEO of Knowledge Makes Cents, a financial literacy academy in Toronto, urges students to go one step further.

"Students must apply basic cash-flow math - your cash outflow must be less than cash inflow," she says.

McMillan says students should set budgets and monitor credit card usage. For the technologically-inclined, she suggests using apps that can "consolidate and track all your credit cards, bank accounts, loans, etc."

Finally, Choi recommends getting a copy of your credit score and credit report at least once a year. By monitoring your credit, you can catch errors before they escalate into larger problems. If, for example, you notice a fraudulent credit card account on your credit report, you can investigate and file a police report before the fraud negatively affects your credit.

Cards that can benefit students
Seeking your first credit card can be overwhelming. More often than not, students will either approach their bank, or answer an unsolicited credit card offer.

Instead, be proactive in searching for your first credit card. Rather than wait for an offer to come to you, research to find the best card for yourself, regardless of which bank offers the card.

Here are three credit cards on the market as of January 2017 that can be great options for students:

BMO SPC CashBack Mastercard
This credit card comes with no annual fee and earns the cardholder 1 per cent cashback on all purchases. Students who pay for utilities, books and other necessities with this card could earn themselves a hundred dollars or so in rewards each year.

In addition, the card features extended warranty and purchase protection to cover students who are nervous about making large purchases. With the SPC branding, cardholders can receive discounts of 10 to 15 per cent at participating retailers in Canada.

With this credit card, the cardholder receives extended warranty, purchase protection and SPC discounts. However, instead of 1 per cent cashback, students can collect one Air Miles reward mile for every $20 spent. There is no annual fee for this card.

MBNA StudentAwards Mastercard
This card allows you to earn one MBNA rewards point for every $1 spent in eligible purchases, and you can redeem points for cashback, travel, brand-name merchandise, gift cards and charitable donations. There's no cap on points earned, and no annual fee.

Being in university is tough enough - and expensive enough - without adding credit card debt to the mix. Use your cards wisely, and you'll not only save yourself a debt headache after graduation, but you'll also set yourself up for a good financial future.

See related: Is higher education in Canada worth the debt?, Student money habits you should kick

Published: January 5, 2017