You’re in college, and you figure you need a credit card. But you’re not sure you have the credit history to get one. Besides, how do you know which card is the best one for you?
If you don’t know where to start, getting a student credit card can be a good beginning. Here’s everything you need to know about choosing a student credit card and using it to build your financial reputation.
What is a student credit card?
Student credit cards are just what they sound like: credit cards aimed at college students. These credit cards are unsecured, so you don’t have to worry about putting money into an account with the issuer as collateral. In that way, they are similar to “regular” credit cards.
However, qualifying for a standard unsecured card can be tricky, according to Sarah Hollenbeck, a credit card expert with deal site Offers.com. To access to the best deals and rewards, you need to have already built up a credit history — and many college students just aren’t there yet. This is where a student credit card comes in.
“Banks recognize that students are just starting to make bigger purchases and build credit, so they don’t require such a long credit history to approve you for a student card,” Hollenbeck said.
But just because student credit cards are easier to get than their standard counterparts, it doesn’t mean there aren’t some drawbacks. “Realize that a lack of credit history also means that students might see a higher interest rate,” Hollenbeck said.
On top of that, pointed out Matthew Coan, the owner of credit card comparison website Casavvy.com, student credit cards often come with lower credit limits.
And while some student cards come with perks, there are usually fewer rewards opportunities than what you see with standard credit cards. “Most student credit cards just aren’t going to offer 0% APR and balance transfer opportunities that the mainstream cards offer,” Coan said.
Use a student card to build your credit
The main purpose for a student card is to boost your credit to the point where you can qualify for a standard unsecured card down the road and prepare for bigger money decisions, according to Alex Cohen, CEO and cofounder of Birch Finance.
“A credit card is both a tool for personal growth in financial responsibility and a sign to lenders that you’re financially trustworthy,” he said. “They’re a great vehicle for learning financial responsibility and developing good spending habits.”
As you use your student card, here are some of the things you can do to build the kind of credit history that will give you a solid start in your financial life:
First of all, said Cohen, it’s important to spend only what you can pay off by the end of the month. Carefully budget your money so that you only buy what’s in your original plan. Credit cards shouldn’t be used for impulse purchases.
“Use the card only occasionally so you avoid spending more than you can pay,” said Jason Steele, a credit-card expert with Credit.com. He pointed out that trying to use a credit card as your main method of spending is an advanced money management technique that should wait until you have more financial practice.
Keep purchases small, planned, and occasional for best results.
Pay off the balance each month
When building your credit history, it’s not about how much money you spend. “Your credit score is basically a grade on how well you pay back money that you borrow,” said Coan. He recommended making your payments on time each month, preferably paying off the entire balance to avoid interest charges.
Steele suggested using tools available to remind you pay on time. Many issuers will send you text alerts to remind you to pay your bill. If you really want to make sure you don’t miss a payment, he proposed setting up automatic debits from your bank account to cover the required amount each month. Just stay on top of the situation so you don’t overdraft your account with autopay.
Keep your credit utilization low
Your credit utilization reflects how big your balance is compared to your credit limit. “Many student cards have limits no bigger than $1,000,” said Hollenbeck. “That limits how much debt you can get in, but it also means you have to be careful about how much you charge.”
Coan said your best credit-building results come when your balance is kept below 30 percent of your credit limit. When you have a $1,000 limit, that means you want to avoid having a balance higher than $300 on your student credit card.
Of course, your limit is your limit. You can charge up to that amount. But it can reduce your ability to build your best possible credit history. And, yes, you can conceivably carry up to 30 percent of your limit from month to month without seeing a negative impact on your credit score. But all of the experts interviewed for this article agreed that your finances will be in better shape if you just pay off the total balance in every billing cycle.
Get help managing your money
When you manage your money intelligently, incorporating your credit card spending into the overall plan, you are more likely to see good results with your credit history, said Steele. He recommended using available tools to help you manage your money. These platforms can help you with everything from setting a budget to understanding and managing your credit:
- Personal finance software such as Mint or Personal Capital
- Credit and money management tools from your credit card issuer or bank
- Consumer credit websites such as Credit Sesame, Credit Karma, and Quizzle
Steele also said it helps to have your parents play a role. “Have a parent or other trusted adult log into the account from time to time, just to check things,” he said. “They can see if it’s being managed well, spot red flags, and help you make positive changes based on what they observe.”
How to choose the right student credit card for you
While Cohen acknowledged there aren’t as many choices for student credit cards as there are for other mainstream credit cards, there are still a significant number of cards available. Deciding which student card will work best for you can be a challenging task.
Cohen suggested starting by analyzing your spending. “Look at your past purchases to see which areas you spend the most money on,” he said. “Your past spending habits will help you figure out which cards have the perks you’re looking for.”
Hollenback advised looking for student-specific perks to offset the lack of more traditional rewards, such as systems that take into account your college GPA or the number of on-time payments you make.
“Since student cards have higher interest rates, it’s important to take advantage of all the other reward opportunities you can,” she said. “Plus, a cash incentive for your grades can help you do well in school while building your credit from the ground up.”
Steele said that there are student rewards cards that offer cash back, travel points, and signing bonuses. However, they might be harder to get than cards that don’t offer these perks. He suggested on focusing on simplicity when deciding what cards to apply for.
“It can help to get a card issued by the same bank or credit union you already have a checking or savings account with,” he said. “That way, payments become simply a matter of transferring funds between accounts. Besides, many of these institutions offer student cards with lower interest rates and management tools that help you learn good financial habits.”
5 student credit cards to help you get started
Now that you have an idea about some of the strategies for using a student credit card, let’s take a look at which card might be right for you. Check out these five cards recommended by the experts:
Discover it Chrome Card for College Students
If you’re looking for an all-around card that offers student-based perks on top of more-standard rewards, then Coan suggests the Discover it Chrome Card for College Students as a good choice. This card comes with such perks as:
- 0% APR on purchases for the first six months
- No penalty charged on your first late payment
- 2% cash back on up to $1,000 per quarter in restaurant and gas station purchases
- 1% cash back on all other purchases
- $20 cash back for each year that your GPA remains at 3.0 or higher
- Dollar-for-dollar match on all the cash back earned at the end of your first year
On top of those features, the Discover it Chrome for College Students comes with no annual fee and doesn’t charge foreign transaction fees.
The card also comes with security features that Coan likes. “You have the option to freeze your account if you lose your card,” he said. “Discover will also monitor your Social Security number and alert you if anyone is trying to use it to obtain credit elsewhere.”
Citi ThankYou Preferred Card for College Students
Hollenbeck recommends the Citi ThankYou Preferred Card for College Students as one that offers some decent rewards — even if they aren’t quite on par with other Citi cards meant for customers with more credit experience. Some of the perks that Hollenbeck likes include:
- 0% APR on purchases for the first seven months
- 2,500 bonus ThankYou Points when you spend $500 within the first three months of card membership
- Receive two ThankYou Points per dollar spent on purchases at restaurants and for entertainment
- Receive one ThankYou Point for each dollar spent on other purchases
You don’t have to worry about an annual fee with this student credit card, said Hollenbeck, but you do have to deal with a 3 percent foreign transaction fee, making this card less than ideal for those who decide to study abroad.
Capital One Journey Student Credit Card
While the Capital One Journey Student Credit Card doesn’t come with the same level of rewards as some other student credit cards — and you won’t get a 0% APR offer — Steele likes its money and credit management tools, such as access to credit monitoring tool CreditWise. The card also features:
- 1% cash back on all purchases
- 1.25% cash back for the month when you pay on time
- Higher credit limit after making your first five payments on time
This card does come with a higher interest rate on purchases than some of the other student cards. However, Steele says this could be an advantage since it might encourage students to pay off their balances in full each month, especially with the card’s emphasis on money-management tools. Plus, the card doesn’t charge an annual fee, and you don’t have to worry about foreign transaction fees when you leave the country.
Bank of America Cash Rewards for Students
If you already have a Bank of America account, Steele said, the Bank of America Cash Rewards for Students Card can provide you with a bonus. It comes with 0% interest on purchases and balance transfers for 12 billing cycles, as well as:
- $150 cash back when you make $500 in purchases during your first three months
- 1% cash back on every purchase
- 2% cash back on grocery and wholesale club purchases
- 3% cash back on gas purchases
- 10% customer bonus if you redeem your cash back into your Bank of America checking or savings account
On top of these perks, Steele points out that the Bank of America Cash Rewards for Students card comes with access to your FICO score, updated monthly. You can look at key factors impacting your score to help you make better decisions. Plus, there is no annual fee, though unfortunately for students traveling abroad, there are foreign transaction fees.
Even though this isn’t strictly a student card, Cohen likes Chase Freedom for students who have had time to establish their credit. If you’ve used a student credit card for a couple of years and managed to build a history, this card can be a good option during your junior or senior year. Some of the rewards you can expect include:
- 0% APR on purchases and balance transfers for 15 months
- $150 signing bonus when you spend $500 in the first three months of card membership
- 5% cash back on up to $1,500 in certain purchase categories each quarter
- 1% cash back on all other purchases
Like other cards suitable for students, the Chase Freedom card doesn’t have an annual fee. However, there are foreign transaction fees that you have to be wary of.
Staying on top of your finances
No matter which student credit card you choose, the important thing is to practice good financial habits. Figure out a spending plan and stick to it. And avoid buying more than you can afford with your credit card.
Remember: Your credit card is a tool. It can help your finances, but it can also be a disaster if not used responsibly.
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|Lender||APR Range||Loan Amount|
|1 Includes AutoPay discount. Important Disclosures for SoFi.
2 Includes AutoPay discount. Important Disclosures for Payoff.
3 Important Disclosures for FreedomPlus.
4 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
5 Important Disclosures for LendingPoint.
6 Important Disclosures for LendingClub.
All loans made by WebBank, Member FDIC. Your actual rate depends upon credit score, loan amount, loan term, and credit usage & history. The APR ranges from 6.95% to 35.89%*. The origination fee ranges from 1% to 6% of the original principal balance and is deducted from your loan proceeds. For example, you could receive a loan of $6,000 with an interest rate of 7.99% and a 5.00% origination fee of $300 for an APR of 11.51%. In this example, you will receive $5,700 and will make 36 monthly payments of $187.99. The total amount repayable will be $6,767.64. Your APR will be determined based on your credit at the time of application. The average origination fee is 5.49% as of Q1 2017. In Georgia, the minimum loan amount is $3,025. In Massachusetts, the minimum loan amount is $6,025 if your APR is greater than 12%. There is no down payment and there is never a prepayment penalty. Closing of your loan is contingent upon your agreement of all the required agreements and disclosures on the www.lendingclub.com website. All loans via LendingClub have a minimum repayment term of 36 months. Borrower must be a U.S. citizen, permanent resident or be in the United States on a valid long term visa and at least 18 years old. Valid bank account and Social Security number are required. Equal Housing Lender. All loans are subject to credit approval. LendingClub’s physical address is: LendingClub, 71 Stevenson Street, Suite 1000, San Francisco, CA 94105.
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8 Important Disclosures for Avant.
* The actual rate and loan amount that a customer qualifies for may vary based on credit determination and other factors. Funds are generally deposited via ACH for delivery next business day if approved by 4:30pm CT Monday-Friday. Avant branded credit products are issued by WebBank, member FDIC.
** Example: A $5,700 loan with an administration fee of 4.75% and an amount financed of $5,429.25, repayable in 36 monthly installments, would have an APR of 29.95% and monthly payments of $230.33
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** Accept your loan offer and your funds will be sent to your bank via ACH within one (1) business day of clearing necessary verifications. Availability of the funds is dependent on how quickly your bank processes this transaction. From the time of approval, funds should be available within four (4) business days.
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|7.46% – 35.99%||$1,000 - $50,000|
|7.99% – 35.89%*||$1,000 - $50,000|
|5.99% – 24.99%2||$5,000 - $35,000|
|5.99% – 29.99%3||$7,500 - $40,000|
|6.79% – 20.89%4||$5,000 - $50,000|
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|6.95% – 35.89%6||$1,000 - $40,000|
|6.99% – 18.24%7||$5,000 - $75,000|
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