If you're in school and looking to build credit, student credit cards are the way to go. These credit cards are made to make it easier for students with little to no credit history to build credit. They function just like regular credit cards, but with higher interest rates. Higher rates are customary since new cardholders have not yet shown a history of credit usage and repayment behavior.
To qualify, you must be able to show an “independent means” of making monthly payments. For example, your part-time job can help. Otherwise, you may need a co-signer. (The co-signer can be anyone over 21, though many ask a parent or other family member.)
As with all credit cards, there are many options to choose from. Here are the top student credit cards this year. Check them out and see if any might work for you.
1. The Best Student Card With Great Rewards and Generous Perks
Discover it® for Students Teaches Good Credit Behavior
Discover it® for Students offers the best student credit card for cash back with no annual fee. This card has a great cash back program that pays up to 5% cashback on purchases. Discover it® for Students also featurea benefits that encourage responsible credit card behavior. What types of benefits? You can expect things like free monthly FICO credit scores, no penalty APR, no first-time late fee, and $20 cash back during each school year if your GPA is 3.0 or higher.
Earn Cash Back on College Spending
The Discover it® cash back program has become popular due to its high cash back percentage. The categories it offers the highest cash back change quarterly. They are often season-appropriate. Think things like more cash back at restuarants and movie theaters during the warmer months.
The cash back on this card is meant to match the spending patterns of college students. All other purchases still get cash back, just at a lower percentage. And the additional cash back for good grades makes this card even more attractive to students.
Why You Should Know Your Credit Score
Since 2014, credit card issuers started to provide free ways for customers to track their credit scores. The belief is that people who track their scores are going to be more responsible with their credit. Although there are many credit scores out there, the FICO credit score is the industry standard.
A FICO score ranges from 300 to 850. The higher, the better. This score takes five different factors into calculation.You can review all this on your credit report, which you can get for free every year at annualcreditreport.com. Just be sure to check your report from all three credit bureaus: Equifax, Experian, and Transunion. They could show some different information from each other. And, keep in mind that viewing your report will not mean you get to view your credit score.
Credit Score Ranges and Quality
|Credit Score Ranges||Credit Quality||Effect on Ability to Obtain Loans|
|300-559||Very Bad||Extremely difficult to obtain traditional loans and line of credit. Advised to use secured credit cards and loans to help rebuild credit.|
|560-649||Bad||May be able to qualify for some loans and lines of credit, but the interest rates are likely to be high.|
|650-699||Average/Fair||Eligible for many traditional loans, but the interest rates and terms may not be the best.|
|700-749||Good||Valuable benefits come in the form of loans and lines of credit with comprehensive perks and low interest rates.|
|750-850||Excellent||Qualify easily for most loans and lines of credit with low interest rates and favorable terms.|
So, if your credit score isn't on your credit report, how can you view it? More and more credit card issuers are giving their customers free access to their scores. This is a great perk for students who want to start building their credit and monitor their progress as they go.
That way, when the times comes, it will be easier to qualify for major loans such as mortgages and car loans. With these major loans, your credit score will make a huge difference not just in your approval, but in how much you'll pay in interest.
How Your Credit Score Can Affect Your Future Mortgage Rate
|Credit Score Range||30-Year Fixed Rate Mortgage||5-year fixed rate mortgage||7/1 ARM|
How Your Credit Score Can Affect Your Next Car Loan
|Credit Score Range||60-Month new Car Loan||40-Month Used Car Loan|
What Happens If You Don’t Pay on Time
If you don't make your minimum payment on time, you'll get charged a late fee. The first time this happens, you can usually get it waived, but not usually after that. The late fee will vary depending on the credit card, but it's usually capped at $35. When a late payment is made, the credit card issuer may also decide to hike up your interest rate to the penalty APR. This is not as easy to get waived as a late fee - and it can cost you big. Most credit cards have a penalty APR of 29.99%. Once you get charged the penalty APR, that becomes your new purchase APR.
If you forget to make a payment on time, the repercussions can be extremely detrimental. Luckily Discover doesn't charge students a penalty APR and it waives the first late fee on the Discover it® for Students card. Another great perk for the student just getting started with their credit.
2. The Best Student Card to Improve Credit Management
Journey® Student Rewards Credit Card from Capital One Offer Free Credit Tools
The Journey® Student Rewards Credit Card from Capital One® is a student credit card that helps teach good credit behavior. Capital One will increase your credit line when you make on-time payments during the first 5 months. There's also a free tool that provides a credit score to help student track their credit improvement. A credit score simulator shows what happens when certain credit activity occurs. For example, a student can see how their credit score changes when they miss a payment, pay off a balance, and more.
Why Choose A Low APR Instead of Rewards?
There is a large variety of student credit cards that offer travel rewards, cash back, or other perks. However, most credit cards that offer rewards and perks come with higher interest rates. Generally, that's okay if you're able to pay off your monthly balances in full. That's the only way to avoid the danger of high interest charges.
If you don’t pay off your balance at the end of the billing cycle, the interest charges you pay can easily outweigh the value of the rewards. Therefore, you’d save more money by getting a low APR credit card. For many college students who are just starting to learn about credit, it would be wiser to not get a rewards credit card and instead opt for a low-interest credit card.
APRs on Student Credit Cards Depend on Credit Score
The interest rate you receive on a credit card will vary based on your credit score. With higher credit scores, you’re more likely to get a lower APR. As a student, you may think that you have no credit history because you’ve never had a credit card before. However, if you've taken out a student loan or a car loan, you're already building credit.
Your student or auto loans can increase your chances of qualifying for a credit card. They can also help you qualify for a higher limit and/or lower APR. Stick with student credit cards in the beginning. Keep showing positive payment behavior and you'll move on to an even better credit card in no time.
3. The Best Student Card With No Credit History
Capital One® Secured MasterCard® Helps Students with No Credit
The Capital One® Secured MasterCard® is great for college students without credit. This card has no annual fee, but it requires a security deposit to act as collateral. Use this card responsibly for at least 12 months and you may be able to then qualify for a regular credit card.
Bonus: this card comes with Capital One’s free Credit Tracker tool. That means you can track our credit score progress as you go.
How to Check Your Free Credit Reports
The three major credit bureaus (Equifax, Experian, and TransUnion) are responsible for maintaining credit reports for everyone in the country. If you’ve never opened a credit card or taken out a loan, your credit report is essentially blank. That means you have no credit history. When lenders check your credit reports and don't see a history, many of them will be hesitant to give you a credit card or loan.
If this happens to you, a secured card is the best way to go.
Unlike a regular credit card, a secured credit card requires you to deposit cash as collateral. This cash is what makes you more likely to get approved. It acts as insurance for your lender in case you should default. Just like a regular credit card, the secured card is reported to the credit bureaus. It only takes a year or less of responsible usage of a secured card to improve your credit score enough to be approved for a traditional card.
Credit Card Qualification Laws for Students
Due to the new financial regulations, most college students will still need income or a co-signer to be approved for a secured credit card. Credit card companies will view your credit report to see your income or assets and debt. They'll look at things like your debt-to-income ratio and debt-to-assets ratio to asses your ability to repay debt. Unfortunately, issuers don't reveal the exact requirements needed to become eligible.
When applying for any credit card, you'll be asked a variety of questions. That could include your annual income, source of income, and monthly housing costs. You may also be asked about the amount of liquid assets you have and about your bank and investment accounts.
Without enough income or assets, you may need a co-signer. A co-signer agrees to take on responsibility for the card in the event that you miss payments. The co-signer can be anyone who is at least 21 years old with good enough credit to be approved. You could ask parents, guardians, family members, significant others, and friends to co-sign for you.
If someone is asking you to become a co-signer for them, understand the responsibility you're taking on. If they start missing payments, you'll be the one that has to pay.
How to Choose and Use Your Student Credit Card
Picking the right major, earning good grades, and carving a career path are some of the most important things a college student can do. And so is building a credit history. Until it comes time to pay student loans, a mortgage, or an auto loan, a credit card is your tool to build credit.
Thinking of applying for a student credit card but still not sure about using credit? Don’t worry. Here are a few credit card tips to help.
1. Choose the Right Card
Don’t assume that because your credit history is limited that your choices of a credit card should be. Take care in the credit card you apply for. Think about what your immediate needs are and how the card can benefit you best.
We recommend starting with a secured card to build credit. Then you can later graduate to another card with more perks central to your credit life. And don’t fall into the trap of thinking you need to have a revolving balance to earn credit. All you have to do to earn credit is use it - so use your credit card but pay it in full every month. That way you can build credit and avoid debt.
2. Buy Small, Not Big
Speaking of purchases, it can be tempting to put some big-ticket buys on your card. After all, the money doesn’t need to be paid back right away. But this can put you at risk for debt - which can damage your credit score and your financial health.
Instead of using the credit card for big purchases, try using it for small, everyday items like gas and groceries. By keeping your purchases frequent but your balance manageable, you’ll be able to ensure that you can pay your bill in full every month.
3. Don’t Juggle Too Many Cards
Less can sometimes mean more, especially when it comes to credit cards. While it may seem that it’s better to have more cards, that’s not always the case. No matter how much you want to impress future lenders, it’s more important to create habits that will keep your finances healthy and growing.
It can sometimes be beneficial to have multiple cards for different rewards, but when you’re just getting started, keep it simple. Stick to just one or two for now (perhaps one secured card and one basic student rewards card) and switch them up from month to month and purchase to purchase.
4. Be Vigilant in Protecting Your Credit and Your Identity
It may seem inconsequential before you’ve built credit, but it’s important to start checking your credit report now (and continuing to check it often).
You get access to your credit report for free with AnnualCreditReport.com. Since this shows your report from the top three credit reporting bureaus (Experian, TransUnion, and Equifax), you could check one of them every four months to keep you on top of it throughout the year.
Checking your credit report can keep you aware of your credit activity, but also alert you to any fraudulent behavior that can leave your credit score vulnerable. On campus or off, be careful of giving away any personal information that can be used to compromise your identity or your finances. Likewise, protect your credit cards. If yours is stolen or misplaced, immediately contact your credit card provider to report the loss.
Credit Cards for Student
|Best Credit Cards for Students||Notable Feature||Who It's Best For|
|Discover it® for Students||Earn 5% cash back on certain categories that change every quarter.||Students who want to earn high amounts of cash back on various spending categories.|
|BankAmericard for Students||Simple credit card with a long 0% intro APR period.||Students who want a simple, no-frills credit card to learn responsibly credit card usage.|
|Capital One Secured||A secured credit card with an extremely low initial deposit requirement to help rebuild credit immediately.||People who have poor credit and don't have a lot of cash for a big security deposit.|