Here's the 1 Financial Tool Every College Student Needs

With school starting up again, it's a great time to get a student credit card.

For many students, college is a big step toward financial independence. It may be your first time away from home, paying your own bills, and following a tight budget. The right financial tools will make this new lifestyle much easier, and one that every college student needs is a student credit card.

You may be wary about getting a card because you've heard about how dangerous credit card debt can be. Although you can get in trouble with credit cards, this is in your control based on how you use them. And when you know about the benefits of student cards, you'll understand why you should have one.

A credit card is a safer way to pay

You're going to need a way to pay for purchases, and there are three basic options: Cash, a debit card, or a credit card. Of the three, a credit card is the safest choice. Let's look at how it compares to the other methods to see why.

Cash is the riskiest, because if you lose it, it's gone. If you lose your credit card, you just report it to the card issuer. The old card will be canceled, and you'll receive a new one in the mail.

The same is true with a debit card, but a credit card is still more secure for a couple of reasons. Most importantly, a credit card isn't connected to your bank account. If you're the victim of credit card fraud, you can dispute it, and the card issuer will freeze the transaction while it investigates. You won't lose any money during that process.

With debit card fraud, the money is taken out of your account when the transaction is made. After you dispute it, you'll need to wait to get that money back.

Credit cards also protect you more if your card is lost or stolen. You're only liable for up to $50 in unauthorized transactions. Most card issuers take it a step further and don't hold you liable for anything. With debit cards, you're liable for up to $50 if you report the loss of the card within two days, but past that, you can be liable for greater amounts.

It can help you build your credit

It's never too early to build your credit, because your credit history has a huge impact on your adult life. If you want to rent an apartment, the landlord will probably check your credit. If you need a car loan or a mortgage one day, your credit will determine how much interest you pay. In most states, credit even affects your car insurance rates.

The simplest way to improve your credit is by using a credit card. Here's how:

• Use your credit card for at least one purchase every month.
• Always pay the bill on time. This will improve your payment history, the biggest part of your credit score.
• Don't let your balance get too high, because it affects your credit utilization ratio. It's recommended to keep your balance under 30% of your credit limit. If you have a $500 credit limit, try to keep the balance below $150.
• Aim to pay your credit card bill in full every month. By paying in full, you won't get charged credit card interest.

Some of the factors that affect your credit are things you can only improve with time. The only way to get a good payment history is to make on-time payments year after year. Your credit score also depends on how long you've had credit accounts open.

By getting started with credit while you're in college, you could have a high credit score by the time you graduate.

Many student credit cards offer extra perks

Student cards offer all kinds of financial benefits that help you save some cash. In recent years, card issuers have been improving their student card offers quite a bit. Here are examples of perks you can find:

• Cash back or rewards points on purchases
• Introductory 0% APR offers
• Sign-up bonuses
• No fees, including annual fees and foreign transaction fees
• A complimentary statement credit for good grades

Exact benefits depend on the card you pick, but there are plenty of excellent options to choose from.

How to open a student credit card

When you're ready to apply for a student credit card, the first step is to pick one you like. Check out the best student credit cards to see how they compare and to find the card that's right for you.

Next is to apply for the credit card. Even though you're a student, you will need some form of income to be approved for a credit card. Income from work, allowances from family, scholarships, and grants all count and can be included when filling out the income field in the credit card application.

If you don't have income, then you'll likely need a cosigner on your application. The cosigner is responsible for any missed payments on the account. Many students ask their parents to cosign on their student credit cards.

Once you're approved for a student credit card, you should receive it in the mail within five to seven business days. Make sure to read the letter that comes with the card to see if you need to activate it.

After that, you can use your card for your regular purchases. Be careful not to overspend with it. The best approach is to use your card for your normal expenses and pay in full so you're never charged interest. Last but not least, mark the bill due date on your calendar or set up autopay so that your payments are always on time.