Best College Student Credit Cards
You need to be at least 18 years-old to get your own credit card in the United States, and this is true even if you have a cosigner. However, surveys suggest that Americans are not rushing to get their hands on a credit card, with the average consumer waiting until they are at least 20, and around a third waiting until they are between 21 and 24.
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But what if you’re a full-time student without a savings account or wealthy parents to rely on? Not only can a credit card get you through those difficult and crucial college years, it can also help you establish a credit history, setting you up for a bright financial future.
Importance of Having a Credit Card as a Student
A student credit card gives you cash when you need it, which comes in handy during your college and university years. Have a party that you want to attend but can’t afford a gift or drink? Whip out your credit card. Need to buy textbooks or other educational materials? Your credit card can help.
As long as you repay each and every transaction at the end of the month, this convenience shouldn’t cost you anything.
Most importantly, however, a credit card as a student allows you to build your credit, which will improve your future prospects, allowing you to secure better loans, credit cards, and even a car or mortgage after you graduate.
How Difficult is it for Students to Get a Credit Card?
College students generally have low credit scores, but not as low as you might think. Estimates suggest the average score for 18 to 24-year old consumers is between 600 and 650. This isn’t disastrous, but for most lenders, it’s too low.
However, that only applies to unsecured credit cards with a high credit limit. These cards often require a score of at least 640. There are unsecured cards with lower score requirements, but these often have very high fees and interest rates.
The best option, therefore, is a secured credit card. Unlike an unsecured credit card, which is literally not “secured” against an asset, a secured card uses a cash deposit as collateral. If you fail to make payments on that card, the creditor can simply use that deposit to cover their losses.
The lender reports all activity on a secured credit card to the three major credit bureaus. If you keep making those payments, you’ll build a strong credit history and several months down the line you may have improved your score enough to get an unsecured card.
A secured card is one of the few credit options if you have a really poor score or no credit history at all. It can get you off the starting blocks and help you to progress toward a better and cleaner financial future.
Student Cards and Credit Utilization
Student credit cards are aimed specifically at college students, which means they may offer more cash rewards for student purchases, as well as statement credit to help them clear balances, and reduced requirements to improve their chances of being accepted.
A secured card typically requires a deposit of just a couple hundred dollars. This will then become the limit, and students can spend against this limit and then repay the debt in full. If, for instance, the card has a deposit requirement of $200, they need to pay this sum upfront and then spend up to $200 over the month.
The balance still needs to be repaid at the end of the month as the creditor will not simply tap into the initial deposit. That lump sum is there solely for insurance purposes, giving credit card companies an option if you default. You will get it back if you meet your repayments and close the account when it is no longer needed.
As with all credit cards, however, it’s important not to max-out the card and to keep the credit-to-debt ratio low.
Credit scores are established using several different parameters, including credit utilization, which accounts for 30% of your score in total. A credit utilization ratio compares the amount of credit available to the amount of debt accumulated. It’s an important parameter because it tells them how credit-hungry you are. What’s more, a high credit utilization score suggests that the consumer is in a difficult place financially and may struggle to meet future repayments on additional loans.
To calculate your credit utilization ratio, simply calculate your total credit and compare this to your total debt. Using the $200 deposit as an example, if you spend $100 during the month, this means that you have $200 credit and $100 debt, or a credit utilization ratio of 50%. This is generally very high, as it means you have used half of all the credit that is available to you. If you reduce that debt to just $50, your credit utilization score drops to 25%.
The main goal as a college student with a credit card should be to build your credit, as that’s the biggest benefit that these cards provide. To do this, you need to keep your credit utilization score below 40% or even 30% if you can—the lower it is, the better.
It isn’t easy to balance your credit utilization score when you have a secured card with a small deposit. After all, 30% of $200 is just $60, which could be a single textbook. The good news, however, is that it only really counts in the short-term.
If you max-out your secured card for several months but still make the payments in full, your score will still improve, and at the end of the term, when you advance to an unsecured card and get a bigger credit limit, none of that will matter.
Your credit utilization score, just like your debt-to-income ratio, isn’t calculated retroactively, which is to say that a lender/credit reporting agency won’t care if your score was poor last month, providing it is good this month.
Nonetheless, it’s important if you need a high credit score in the short term and it also helps to establish good habits.
Pros and Cons of Student Credit Cards
From a deposit you may struggle to afford to an intro APR that can be overlooked, there is no shortage of downsides to owning and using a credit card, especially as a college student. But don’t dismiss those credit card offers just yet, as there many benefits as well.
Pro: Fraud Protection
A credit card can provide you with more advantages than a bank card. Firstly, it’s not connected to your bank account, which, in turn, contains most of your money. If you lose a credit card, you can simply cancel it, file a fraud claim, and get back all of the money taken from you.
As a college student, you can do the same with a debit card, but banks are much less forgiving. They can, and often do, refuse to compensate consumers for fraudulent charges, especially if there is any doubt as to the authenticity of the claim. Credit cards are a different story and you shouldn’t face any issues whatsoever.
Credit card fraud is becoming increasingly common as hackers and fraudsters turn their attentions away from big businesses and high-income individuals and towards unsuspecting consumers. But according to the Fair Credit Billing Act, the most cash you stand to lose if you’re the victim of credit card fraud is $50.
What’s more, this is one of the few areas where banks actually go above and beyond the regulations. Many providers offer zero-liability protection, which means they will cover every cent that was stolen from you if you file a prompt and proper claim.
They also use advanced algorithms to track and monitor spending. If an abnormal purchase is made on your card, your credit card issuer may contact you to check if you made the purchase or not, potentially alerting you to an act of fraud within minutes of it taking place.
Pro: Rewards Program
The best credit cards for college students have a built-in rewards program that offers cash-back rewards in exchange for regular spending. A rewards program may be connected to specific purchases, such as utility bills, education materials or food, but, in most cases, you will earn some form of cash back or airmiles every time you spend.
You may struggle to find a viable rewards program on a student credit card, but they do exist. Some student credit cards offer student cash rewards programs, while most secured credit cards will allow you to progress toward a rewards credit card if you prove that you are a responsible consumer.
A student credit card is not designed with big purchases in mind; the credit limit will likely be very low, and you shouldn’t use it to make significant purchases. It’s unlikely, therefore, that you will receive any substantial rewards. But you can earn cash here and there and use it to offset some of the additional fees you may be charged, including cash advance and foreign transaction fees.
Pro: Build Credit History
A credit card can help to improve your credit history by establishing a tradeline. You improve your credit score by acquiring new credit accounts and then proving you’re capable of paying them off. This is how creditors know they can trust you.
A credit card is one of the easiest lines of credit to acquire for a student, especially if it’s a secured credit card, which means it’s one of the best ways for college students to build credit. Of course, for this to happen you need to meet your monthly payments, otherwise, your credit score will take a hit and you’ll be in a much worse position than when you started.
Pro: Cash When You Need It
A credit card is basically a payday loan without the extortionate interest rates. If you use it sensibly and don’t spend money you haven’t got, it can help you in emergencies. If you need textbooks, food or even a birthday gift to keep you going for the next few days, you can use your card and then clear the balance to avoid incurring any additional fees.
Pro: It’s Easy Credit
You should never ignore debt or try to weasel your way out of it, as you’ll always damage your credit history and your chances of getting credit in the future. However, it’s worth noting that unsecured credit card debt is the least damaging of all debt and the easiest to escape from.
Credit card companies are much more willing to accept greatly reduced settlement amounts and unlike mortgage loans and car loans, they can’t take any of your assets. There are also much less likely to file a judgment against you and more likely to sell your debt to a collection agency.
What’s more, most unsecured debt isn’t collected after the debtor dies (credit card companies can collect, but they are at the back of the line and the cash is often gone when it’s their turn), doesn’t pass onto their next of kin, and also has a statute of limitations.
This is a “pro” that we’re always wary of including as we don’t want to be seen recommending that you ignore any form of debt. However, we hear many stories from debtors who were hounded by collection agencies from 10-year-old debt and were tricked into paying it. The same goes for children and spouses of deceased debtors. In the majority of cases, none of these individuals are responsible for it and being ignorant of the fact costs them a lot of money.
It’s not their fault, of course. They’re not financial experts and they assume that debt collectors are being honest with them and are only trying to help when they offer reduced settlements and favorable payment plans. These consumers could be forced to pay thousands of dollars, destroying their credit reports in the process, and all because they weren’t informed about the specifics.
Meet those payments and keep that credit history clean for as long as you can. But if things go wrong several years down the line and your credit card debt is unsecured (this doesn’t apply if you have a secured credit card) know that you have several options.
Pro: Intro APR
Many student credit cards offer an intro APR to entice you in and allow you to save money during the first few months. This intro APR gives you a chance to spend money without accumulating interest, which means you only need to pay the principal if the balance rolls over from one month to the next.
An intro APR is even more common on balance transfer credit cards, and it’s offered on purchases as well as transfers. However, you can secure the same offer on many traditional credit cards and reward cards as well.
Pro: Low Requirements
There are some strict requirements on student loans, personal loans, mortgages, and pretty much all other forms of debt. However, it’s a different story with credit cards. While some cards insist on a credit score of at least 640, especially if it has a high credit limit, others will accept you even if your credit history is blank.
Look for a secured credit card if you’re struggling to get accepted elsewhere. These cards can help you to establish a credit history and make it easier to apply for other forms of credit in the future.
Credit cards aimed at college students with no credit history or a low credit score often charge fees for basic services and transactions. It’s unlikely that you will be charged a transaction fee and you shouldn’t be hit with a big annual fee either. However, cash advances, late payments, and purchases in a foreign currency may incur a substantial fee.
Con: Higher APR
A student credit card may provide you with a low intro APR to ease you in, along with student cash rewards, grace periods, and more. However, once the honeymoon period ends you may be charged a higher APR on purchases, as well as a significantly higher penalty APR.
All credit card offers are required to clearly state their full terms and conditions, allowing consumers to compare one card to another and to ensure they understand what they’re getting.
As a result, you should clearly see what the usual variable APR rate is once the introductory period ends. Be sure to pay close attention to this and don’t get drawn in by the trial offers.
Cons: It’s Easier to Acquire Debt
Every credit card user has good intentions… to begin with. They monitor their budget, only accumulate debts they can repay, and cover the balance in full every month. But things turn ugly very quickly.
They’re hit with a bill that they can’t pay in cash, they fall behind, have a bad month, and before they know it, they have accumulated a balance they can’t pay. The debt builds and builds, the credit card maxes out, and from that point, they are fighting a losing battle.
Estimates suggest that 55% of Americans have credit card debt at any given time, while a large number of the remaining 45% have had debt in the past.
Con: Limited Benefits
If you have a secured credit card, your options are limited, and your benefits are few. You need to pay a security deposit and your credit limit is fixed to that deposit. In other words, it’s a credit card without a line of credit. As good as it is for building credit, it’s far from perfect and thanks to that deposit, you’ll need to lay down cash before you can use the card.
If you’re short on funds, that’s an option that simply isn’t available. It means you’re spending money to acquire credit, even though that credit still needs to be repaid every month.
Best Credit Cards for College Students
College students have plenty of options, with both secured and unsecured cards available. Here are a few of the best options for students seeking their first credit cards, as well as international students looking for a low-fee card.
Best First Unsecured Cards for Students
Your first credit card should be low-fee, low-requirement, and low-risk. That criteria isn’t easy to meet, but there are a few credit cards that tick all boxes:
- Wells Fargo Cash Back: Get statement credit and cash back on this rewards credit card, which offers as much as 3% cash back for a limited period and 1% unlimited after that.
- Petal Cash Back Card: Get up to 1.5% cash back on a card designed for low-credit users. You can get a limit of between $500 and $10,000 and there are no fees and low APRs.
- Deserve Edu Student Card: A $30 sign-up bonus is offered in addition to a free year’s membership of Amazon Prime and an unlimited 1% cash back.
A credit history is often required for these cards, so you may be refused if you don’t have any credit history at all.
Best Cards for a College Student Studying Aboard
The Bank of America Travel Rewards Card for Students is one of the best options for students who study abroad. There are no foreign transaction fees and it comes with a rewards scheme that awards points for regular travel. More importantly, it’s available to consumers with little or no credit.
The Bank of America Travel Rewards Card for Students is far from the only option, but it serves as a good benchmark for what you need in a credit card when you study abroad. The fees are low, you’re not punished when you travel or spend in another country, and you can get student cash rewards every time you use it.
Here are a few more options with similar benefits:
- Capital One Journey Student Rewards: No annual fee or foreign transaction fees, plus you can get up to 1.25% cash back. It is offered to consumers with low-credit and an upgrade to higher credit limits is available after 5 months.
- Discover It Chrome: We have made no secret of our appreciation for the Discover It credit card. It is one of the best reward cards around and this version is just as impressive, with no annual fee or foreign transaction fees and up to 2% cash back.
- Capital One Venture: This card charges an annual fee, but it is waived for the first year. There are more benefits as well, but it is reserved for consumers with higher FICO scores.
Best Secured Cards for Students
A secured card doesn’t offer many of the benefits discussed above, but there are cards with reward schemes and there are a few other benefits as well. Most importantly, the requirements and risks are low.
- Discover It Secured: No annual fee and a rewards scheme—the ideal secured card for many college students. Deposit upwards of $200.
- OpenSky Secured: An annual fee of $35 is charged, but you can open the card with as little as $200.
- Credit Builder Secured: An annual fee of $35 and a credit limit of between $300 and $3,000, depending on the size of the initial deposit.
- Citi Secured MasterCard: There is no annual fee and a number of benefits, but it’s one of the few secured cards that requires a high credit score.
You don’t need a social security number to apply for a secured card; credit scores can be as low as 300 or completely non-existent. They are by far the easiest cards to apply for and are one of the best ways to build credit.
Credit Card Alternatives for College Students
Although secured cards are one of the best ways to build your credit history and advance toward a brighter financial future, they’re not the only options available to you. Here are just a few other alternatives to consider if building a strong credit report is your goal:
Credit Builder Loan
These loans exist for the sole purpose of establishing credit. The money is stored in a secured account and you’re not given access to it until you have repaid in full.
It’s a terrible option if you need a cash sum, as that’s not the purpose of these loans. However, it’s a good way to build credit and can even be used alongside a secured or unsecured credit card to hasten the score building process.
To make this work, you need to meet your payments on time, otherwise, your score will suffer, and you won’t get any of the benefits. You will also pay a small fee on top of the money you “borrow”.
A lending circle is like a group of friends all paying into a pot that a single friend collects every month. It’s not a loan as such, but it does provide you with a cash advance when you need it. More importantly, if you choose an online lending circle, all activity will be reported to the credit bureaus, allowing you to build your score while paying a nominal fee for the pleasure.
Every transaction is recorded, all activity is reported, and if you keep meeting those payments every month then not only will you receive your cash lump sum every so often, but you’ll also see your score gradually improve.
If you’re struggling to improve your credit report because you’re drowning in debt, it’s worth looking into getting that debt cleared. This will increase your score and give you better options for future credit.
However, if some of that debt is tied into credit cards, make sure you keep those cards open once the debt has been repaid. This will help to keep your credit utilization score high and unless you’re being charged a fee to keep it open, you won’t lose anything.
Check out into debt payoff strategies like Debt Avalanche and Debt Snowball to discover how you can make extra payments every month. Debt relief strategies like debt settlement and debt consolidation can also help.
Summary: Apply for a Student Credit Card
A student credit card may not be as important as a student loan, but if you’re stuck with a low credit score and a poor or nonexistent credit history, or you simply need access to emergency cash, it could be essential.
Check your financial situation, make sure you understand the pros and the cons, and apply for a student credit card today. The sooner you start the application process, the sooner you can establish a credit history, improve your credit score, and start preparing for your future.