Credit Cards 101 For Indian Students In The US: An Easy, Clear And Informative Guide
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Credit Cards 101 For Indian Students In The US: An Easy, Clear And Informative Guide

Renee

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About 50,000 students move to the US every year from India to realise their academic aspirations. However, migrating to the US is an uphill task, even after getting an admit, you still need to arrange funds for your program, file your I-20 Form, and prepare for your visa interview. Amidst all the pre-departure tasks and checklists, the last thing you need to worry about is researching bank accounts and best credit cards for Indian students in the US.  If you want to understand why you need a US credit card, what your options are, and how to go about getting one, read our FAQs below.

Do I really need a US credit card?

Short answer, yes you do. A credit card lets you borrow from the issuing bank upto a pre-approved limit. Here in India, one can function quite comfortably without one, especially as a student, but the scenario is vastly different in the US.

Across the USA, credit cards are the most convenient and secure way to transact on a daily basis. Further, using a US Credit Card properly will help build your US credit score, help you stay within your budget, and they might even earn you some rewards.

So how does a Credit Card work?

US Banks or financial institutions that issue Credit Cards authorize a credit limit, which is the maximum amount you can borrow on that card. It’s a short-term loan that you can use to withdraw money, make purchases, or pay bills. This credit limit is determined by various factors like your income, your other debts, your payment history and how much available credit you have on other US Credit Cards. It is advisable to use less than 30% of your credit limit (ideally 1%-10%) to build a good credit score.

Payment networks such as Visa, Mastercard, Discover and American Express then process credit card transactions by ensuring that the money for the purchase gets to the merchant and that the correct cardholder gets billed.

At the end of your billing period, you can choose to pay a minimum amount, some of the amount or all of it. Paying the full amount is the best option for you because you avoid paying any interest on purchases at all. However, if you’re strapped for cash, you can choose to pay the minimum amount or part of the total. You will be paying interest on whatever money you still owe so pay off however much you can! Apart from that, this improves your credit score.

US Credit Card - What should I consider while getting one?

Look at the various US Credit cards that you are eligible for, and compare them before applying for one, since some cards are much better suited to your needs than others. Thoroughly explore the benefits, caveats, and the terms and conditions of any card you consider.

Check to see the annual fees for any credit card you're considering. This amount is charged yearly but may offer attractive rewards. Most basic US Credit Cards for students don’t have an annual fee, and if you're paying an annual fee, you need to be sure that the rewards you're getting are worth more. Rewards can enhance the value of paying with a credit card and be in the form of a cash back, points or miles, but these might have restrictions on when you're allowed to redeem these rewards.

Another important factor to consider is the interest rate, which is typically stated as a yearly rate or Annual Percentage Rate (APR). The APRs for cash advances and balance transfers, the regular variable APR for a purchase and promotional APR terms and conditions will vary from provider to provider, so read about these carefully!

Credit Cards might also offer introductory bonuses, so check about those, and also the terms and conditions of these offers. But don’t be swayed by these; choose your card based on your expected expenditures and spending patterns, not on rewards that you may or may not get.

What are the kinds of credit cards on offer?

Boardly, there are five types of credit cards available.

  1. Rewards cards: These Credit Cards offer you rewards such as cashbacks, points, miles or loyalty benefits for shopping at a particular store or service provider.
  2. Low interest cards, as the name implies, these Credit Cards offer a lower interest rate, which makes it less expensive to carry a balance. Often, these cards will come with a 0% introductory APR period, which gives you time to pay off a large purchase without interest.
  3. If you already have credit card debt, a balance transfer credit card lets you move your debt from another issuer to take advantage of a lower interest rate. This is usually not applicable for Indians moving to the US since they do not have any existing credit card debt.

For people with no credit history or a bad one, issuers might offer a secured credit card. You need to pay a security deposit that you get back after closing the account or upgrading to a regular, unsecured card. Since Indians moving to the US do not have a sufficient credit history in the US, Most fall under this category. The only way is to demonstrate your credit worthiness by repeatedly making payments on time on your credit card or other loan products. Once your credit score increases and moves to a more acceptable range, you can then get an unsecured Credit card.

  1. Student credit cards in the US can be issued even to someone under 21 if they have proof of income or a co-signer such as a parent with a good credit score who is willing to put their credit on the line to help the applicant build theirs.

A charge card is a similar lending instrument. However, there is one vital difference between a charge card and a credit card. Credit cards let you carry a balance from month to month, while charge cards require you to pay in full each month. These are rapidly becoming obsolete since credit cards offer far more benefits.

What is a Credit Score

Your US credit score is a number between 300- 850 that shows how safe or risky it is to lend you money. It is basically an indicator of credit worthiness of a person. For instance, people with a low credit score will have a harder time getting a loan approved. Higher credit scores can help you get loans easily and at a lower interest rate. So it just makes good financial sense to keep your credit score up!

The most common way to calculate your credit score is the FICO scale, formulated by the Fair Isaac Corporation. Your payments are reported to companies that prepare credit reports, called credit bureaus, and your payment history counts for 35% of your credit score.

You can read about credit scores in depth here.

How do I get a credit card in the US?

So this is where it gets tricky. To get a US credit card you need a credit score in the US, and to have a credit score, you need a credit history, for which you need a credit card… Settling into a new country is tough enough without this added catch-22 situation.

You could, of course take a secured credit card, or one with an exorbitant annual fee and interest rate, but you don’t want to spend your hard-earned money on this. So how do you get a credit card for students?

This is where Zolve can help. We provide zero fee credit cards for Indian students moving to the US with exciting rewards even before they travel, based on students' credit history in India. Zolve credit cards offer high credit limits at affordable interest rates so that you can shop for all your needs and build a good FICO score simultaneously.