Everything to Know about Student Bank Accounts and Credit Cards

Picture this: a first-year arrives on campus in September and the quad is buzzing with offers to join student clubs, attend campus social events and—front and centre—banks offering free merch. A water bottle here, a T-shirt there, and maybe the promise of cash back or reward points for students who sign up for new accounts or credit cards.

In an ideal world, students would take time to compare products and read the fine print before making any financial decision. In reality, they can get caught up in the moment and act on impulse, especially if they see their peers signing on the dotted line. That’s why it’s best for students to understand their options before they arrive at school. Here’s what a student should consider when opening a bank account or getting a credit card—and how they can use them wisely.

Choosing a good student bank account

If a student doesn’t have a savings account yet, it’s time to get one. Having a bank account is a critical step in learning how to manage money and taking responsibility for one’s spending. To keep bank fees down, students should look for an account with no monthly fee, no requirement to keep a minimum balance in the account and few—if any—other fees.

Most of Canada’s major banks offer no-fee student accounts to those enrolled in high school or post-secondary. Once a student is out of school, however, the account will automatically convert to a standard account, with fees, which can add up to hundreds of dollars annually. 

For that reason, some experts recommend bypassing student accounts and instead choosing a standard, no-fee account from the get-go. These types of accounts are available through some credit unions and online banks. Canadians who are the age of majority (18 or 19, depending on the province) are able to sign up for any of these no-fee accounts. Some institutions—for example, Tangerine and Simplii—have no-fee options for those 16 and up.

Budgeting and saving as a student

Students will often get large sums of money at once—from a Registered Education Savings Plan, student loans, scholarships or gifts from family—and they might be tempted to overspend. Shannon Lee Simmons, a Toronto-based certified financial planner, says it can be helpful for students to have one account that holds money for regular, recurring expenses, like rent, tuition and cell phone bills, and another for money that’s to be spent on discretionary items, like groceries, entertainment and clothing. Money for fixed expenses can go in a high-interest savings account or a second chequing account—whatever’s easiest.

Students who have money they plan to hold longer-term—for example, a co-op student who doesn’t need their earnings during the school year—could set up a Tax-Free Savings Account, or TFSA. When interest or investment earnings build in these accounts, it’s not taxed. Trevor Cheung is a second-year student in the co-op computer science program at the University of Waterloo. He’s had a TD student bank account since his early teens and now invests in a TFSA through TD’s Easy Trade platform. “I keep a sizable buffer in my chequing account to make sure I don’t run out of money. Whatever is in excess of that buffer, I transfer to my investing account,” he says.

Choosing a good student credit card

We live in a society that relies on debt, so it’s important for students to practise borrowing money and paying it back. Doing so helps build good credit, which is essential for getting favourable terms on a car loan or mortgage, or, in some cases, for renting an apartment, as many landlords check a prospective tenant’s credit. 

But it’s much harder to get credit when you don’t have any. That’s where student credit cards come in. These cards have a low spending limit (often between $500 and $1,000 to start) and students can get one even if they don’t have a credit history. By using the card for purchases like clothing and entertainment, and then paying off the balance on time each month, students can slowly build credit. (On the flip side, if they’re late or miss payments, their credit score will take a hit.) 

There are nearly 20 student credit cards on the market to choose from—most of the big banks offer them. It’s important for students to look at all the terms and conditions carefully. 

Last summer, Jessica Moorhouse, an accredited financial counsellor and money expert, researched all the student credit cards available and created a spreadsheet to compare them (it’s available for download on her website). Based on the terms at the time, she highlights three no-fee cards: the Student BMO Cashback Mastercard, the CIBC Aeroplan Visa Card for Students, and the Scotiabank Scene+ Visa Card (for students). The terms for credit cards can change any time, so it’s important to verify them with the provider before signing up. Students should pay close attention to annual fees, interest rates and rewards like cash back or redeemable points that are offered for travel or other purposes.

Learning good credit habits

Using a credit card to buy things is just like borrowing money. The monthly bill includes a tally of the total amount spent (i.e. borrowed) and requires a minimum payment (typically $10 or some other flat dollar amount, plus any interest or fees). The best practice is to ignore the minimum payment and instead pay the full statement balance each month. That’s because credit card companies charge very high interest rates on all outstanding balances—often more than 20 per cent per year.

What does that interest look like in real terms? Say a student maxed out a credit card with a $1,000 spending limit and made just the minimum payment each month. It would take more than eight years to pay off the debt and, by that point, the student would have paid more than $1,000 in interest.

It’s important for students to be aware that cash advances—money borrowed from a credit card account—have no grace period; they accrue interest (often at an even higher rate than for purchases) from the very first day they’re withdrawn. So it’s best for students (and others) to avoid them entirely.

Aside from interest charges, there can be other fees on credit cards—such as penalties for going over the spending limit or missing the payment deadline (even by a single day). Doing those things can also affect a student’s credit score. To avoid these pitfalls, students can track their spending in a spreadsheet or log on to their online credit card account to track their spending (and to make sure there’s no fraudulent activity happening). Another option is to schedule a bill payment to take place three days before the deadline (to make sure it has time to clear). Alternatively, they can submit a pre-authorized payment form to have their full credit card statement balance automatically paid from their bank account by the deadline each month. Either way, they’ll need to make sure they have enough money in the account or the transaction won’t go through. 

Students who tend to make impulsive spending decisions would be wise to come up with a plan for credit card use. This could mean, for example, only using credit for recurring monthly expenses, such as phone and subscription services, while day-to-day spending goes on debit or a prepaid credit card. By understanding their typical spending patterns and what types of things they tend to buy on impulse, students can avoid running into trouble with credit card use. Students can also consider putting a temporary block on their credit card if they think they’ll be in an environment that’s too tempting.

Nobody is 100 per cent perfect with money. Young people will make mistakes, but it’s better to make—and learn from—those mistakes at a young age, when there’s plenty of time to recover.

This story appears in the 2025 edition of the Ultimate Guide to Canadian Universities. You can buy the issue for $19.99 here or on newsstands.