I’ve heard about student credit cards, but I don’t really know anything about them. Should I get one?
Credit card companies make special credit card products designed for students, but before you get one it’s important to understand how credit cards impact your credit history.
If you don’t use a credit card responsibly you could end up with lots of expensive debt, negative items on your credit report, or both.
Many negative items, like late payments, stay on your credit reports for 7 years. Bad credit history can make it hard or impossible to rent an apartment, get car insurance, or get smartphone financing and data plans.
Best Student Credit Cards – Our Top 3 Picks
Here are our most recent picks for the best credit cards for students. For the full details about why these are our most recent picks, see this post: The Three Best Credit Cards for College Students.
For People with
- Annual Fee: $0
- Interest Rate: 13.74%–22.74% Variable
For People with
- Annual Fee: $0
- Interest Rate: 12.99%-22.99% (Variable)
For People with
- Annual Fee: $0
- Interest Rate: 13.99%, 18.99%, or 23.99% (Variable)
Although Ibis Consultants receives compensation from some credit card issuers as advertisers, this does not influence our choice of cards or the order that cards appear on the page. We have attempted to determine the best cards in this category, regardless of our advertising relationship with issuers.
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Why Building Credit Is Important for Students
Credit history can have a big impact on your future. Your credit history is important for getting credit cards and loans, but can also influence things like renting an apartment, getting insurance or even getting a job.
As you start out your credit-building journey, you could go one of three ways:
- Make credit mistakes: With no credit history established and little-to-no understanding of how credit works, it’s easy to rack up debt or do major damage to your credit history that can last for years. For example, let’s say you apply for a store credit card. Maybe you don’t understand how paying the bill works, and end up spending up to the credit limit on that card, and then only pay the minimum due, costing you a lot of money in interest. Then, you pay two months late, resulting in a negative item on your credit reports that will last 7 years. Frustrated, you pay off the card and close it, ending the life of an account that could have been your key to a long average account age. Now, several years later, you want to rent an apartment, but no landlords will rent to you because of your poor credit history. People make these types of mistakes every day, but if you arm yourself with the knowledge of how credit works you don’t have to end up like them.
- Avoid credit completely: It might be appealing to avoid credit cards. You might pay cash or use your debit card for everything. Maybe you even think when you choose “credit” for a debit card purchase that you’re building credit (you’re not). For some people who can’t control their spending it might make sense to avoid credit cards, but time is valuable in your credit history. If you later decide you want to build credit, you’ve missed out on years you could have been building up your credit history.
- Build credit responsibly: You learn how credit reports and credit scores work, and how credit cards or other types of loans impact your credit. You know that building credit doesn’t have to cost you any money at all, and that it’s possible to build credit without being in debt. You use this information to start building credit history now so you’ll be in great shape in the future and ahead of your peers who, possibly unknowingly, took path #1 or #2.
Ready to get started?
It’s not hard to get started down path #3. If you’re a student, you may already have student loans. As long as you’re paying those on time you’re likely already building positive credit history, but there’s more to it than just that paying bills on time.
We’ve put together this comprehensive guide that covers how to build credit, and specifically how credit cards help you do that. Once you read the guide, please email us with any questions you have and someone from the team will get back to you right away.
What Are Student Credit Cards?
Student cards are special credit card products that are usually only available to students enrolled in college or university. They’re designed for people with little to no credit history, which is common among college students who haven’t had many opportunities to establish credit yet.
Don’t assume that you need to get a student credit card just because you are a student — it is possible to get other cards with little or no credit, like secured credit cards, but you also may be able to get a better cash back or travel card, especially if you have established some credit already.
What Makes a Great Student Card?
The best credit cards for students will build credit while costing you nothing, and actually saving you money through rewards and extra benefits. Here are some things to consider:
- Annual fee: If you’re new to credit cards, you’ll probably want to start with a credit card that doesn’t have an annual fee. Sometimes, paying an annual fee can be worth it to get extra benefits, but when you’re just getting started you can stick to the basics and find a card that won’t cost you anything just to have. Luckily, student credit cards don’t usually have an annual fee.
- Rewards program: Some student credit cards earn rewards, and credit card rewards programs vary. For example, some cards provide a flat cash back rate, like 1%, on all purchases. Other cards give more rewards in certain categories, like 3% cash back at gas stations, as the BankAmericard Cash Rewards for Students does. Sometimes, the categories that earn more rewards rotate, like with the Discover it. Consider what categories you spend money on the most to determine what card would allow you to maximize rewards. If you can’t get approved for the card that would be most rewarding to you, however, it’s not a huge deal because you can still build credit with another card and apply for a more rewarding card in the future.
- Extra benefits: Many credit cards come with extra benefits, like extended warranties on purchases. These are usually pretty similar from one card to the next, so it might not factor into your decision of what card to apply for, but you should still look over the benefits of any card you’re considering so you can figure out how to make the most of the card.
- Interest rate: NOT! We recommend you pay your balance in full every month. If you do that, the interest rate doesn’t matter, since with most credit cards you get a grace period and won’t pay any interest as long as you pay in full. Many people consider interest rate when shopping around for credit cards, but that assumes you’ll be carrying a balance for a long period of time. There are other factors to consider before the interest rate if you’re not going to carry a balance. Sometimes emergencies happen and you might have to carry a balance, but in that case you should be paying it off aggressively and back to interest-free to continue avoiding interest.
When you start your search for a student credit card, or really any credit card, you might think all the different options seem similar. It’s not just you — the credit card business is very competitive, so companies are always trying to catch up with or out-do one another in their credit card offerings.
When you’re just starting out, make sure you understand the basics of how credit cards and building credit work, since that’s the same for pretty much every credit card. Then, look through your options and make a decision about a card that seems like a good fit for you. If you don’t get approved for you first choice, you could try for your second choice, or explore other options for your first card.
Laws in Place to Protect Students from Predatory Marketing
If you’re under 21, there are laws that may make it more difficult for you to get a credit card. The Credit Card Accountability Responsibility and Disclosure Act of 2009 (informally referred to as the “CARD Act”) protects students and consumers under the age of 21, credit card issuers must now:
Obtain proof of income before issuing a credit card to consumers under 21 years of age. If you don’t have an income, a credit card co-signer is required in order for the application to be approved. If you’re looking to get a credit card without a co-signer and you’re under 21, one option is to get a job so you can have your own proof of income. Another option you may have is to become an authorized user on someone else’s credit card, which can help you build credit using an existing credit card account so you don’t have to apply on your own or provide proof of income.
Obtain prior consent before sending pre-approved credit card offers to anyone under the age of 21.
Obtain written permission to increase credit limits on accounts with co-signers for accountholders under the age of 21.
Cease all predatory lending practices and aggressive marketing tactics on or near college campuses.
If you’re looking to get a card, see our guide to building credit with credit cards to explore some options for your first credit card.
The Biggest Credit Mistakes That Students Make
Here are a few common mistakes students make with credit cards. If you’ve read our guide to building credit with credit cards, you’ll understand why all of these are big mistakes. If you haven’t, go read the guide now!
Getting Credit Cards without Understanding How They Work
While there is some mystery around the credit approval and credit scoring process, there is nothing mysterious about using credit cards responsibly (check out our guide to responsible credit use here).
Credit cards are deceptively easy to get and to use, but they are serious financial tools that will affect your life. There is no licensing process that requires you to pass a test proving you are knowledgeable enough to use a card; it’s up to you to inform yourself about the benefits and hazards of credit cards.
According to a survey by Fidelity, 25% of students who graduated in 2013 carried credit card debt with them, at an average of $3,000 per graduate. This is very high, especially considering that most students (70%) who graduated that year also left with student loan debt, at an average of over $35,000.
Carrying high balances on your credit cards not only costs you money, but if your balance is high relative to your credit limits that can have a strong short-term negative impact on your credit scores.
We recommend paying off your new credit card balance in full each month by the due date. If you need help understanding how credit card bill work and how much you should pay, see read this guide. You should always consider a credit card purchase as being made with your own money that you have in your possession right now, which leads to the next mistake.
Buying Things They Can’t Afford
Credit cards can increase impulse spending, giving some people the urge to spend money they don’t have, since that’s exactly what a revolving credit limit allows someone to do.
One of the best ways to combat this tendency are to be aware of it, and to think of your credit card as being intimately linked to your bank account: do you have enough money in your bank account right now to pay for this purchase you’re considering?
When you pay your bill every month (or even every week, which isn’t a problem and what some people prefer) you’ll be able to keep any eye on how much your spending compared to how much cash you have available to pay your bill so you can make spending adjustments for the next month, if necessary.
Paying Only the Minimum Payments
Every month you’ll get a statement from your credit card issuer detailing the previous month’s activity. The statement will show you the full amount you owe (statement balance) as well as a “minimum payment” or “minimum due” amount, which usually a rather small amount around 1-5% of what you owe.
It’s a mistake to think that you can pay just the minimum amount each month and be worry-free. Your bank will likely be very happy if you only pay the minimum, though, because you’ll be paying them a lot of extra money in interest.
The bank is not on your side with the minimum payment calculation. That number is not the bank telling you how much you should pay. It’s only the minimum amount they’re willing to accept to keep your account in good standing. The remaining balance will accrue interest each month with most credit cards, which will end up costing you a lot of extra money in the long run.