Student credit cards 101
According to a recent post by Kristen Kuchar on the topic of students’ common money mistakes, she reported that the average college student can accumulate as high as $3,000 in credit card debt. Of course, this doesn’t mean student credit cards are bad or should be avoided. In fact, the potential is often justified by the opportunities made possible by establishing a positive credit history.
To better understand how these cards work for students, we must first start at the beginning. The Credit Card Act of 2009 stipulates that a student of 18-21 years of age may qualify for a credit card if one of the two conditions are met:
- A parent, guardian, spouse, or another adult is willing to co-sign
- You submit proof of income and financial history proving a full-time income (or even a part-time income that’s sufficient enough to pay the balance each month).
Where can I find credit cards for college students?
Most major banks and credit card providers offer credit cards for college students. If you are a parent looking for a credit card for your college student, make sure you pay attention to the benefits and rewards. The best credit cards for college students include one or all of the following benefits:
- Forgiveness for the first late payment (we all make mistakes)
- Cash back bonuses for maintaining a certain GPA (more incentive to hit the books)
- Rewards for food, gas, and school supplies (common college student expenses)
What are the best credit cards for college students?
If you’ve reviewed our top picks and you still aren’t sure what the best credit card is, you may need to do some research. Generally, an ideal credit card for a college student is one that has some flexibility and forgiveness when it comes to monthly payments. More likely than not, your college student might slip up and forget to make a payment. No reason their credit history has to suffer.
Another hallmark of an ideal credit card for college students is one that promotes their studies. Many credit cards like the Discover it® Student Cash Back offer monetary incentive to cardholders who maintain a certain GPA. You might also consider a credit card that rewards spending in categories that match your college student’s needs (food, school supplies, books, etc.).
Can you apply for a credit card at 17?
Unless you are legally emancipated, you cannot apply for a standard credit card in your own name until you’re 18 years old. However, you might still be able to gain access to a card by getting a co-signer to share your credit responsibilities. If you’re interested in a credit card, but you are not old enough to apply, you might consider discussing the matter with a parent or guardian.
When you need a parent to co-sign
When you’re a student starting out with a credit card, you might need a parent to co-sign. This is not an uncommon situation as most first-timers usually won’t have a credit history or enough income to qualify for a card on their own.
Co-signing risks for parents
While there are plenty of benefits, there are also risks for both parents and students. For instance, parents who co-sign are mutually responsible for debts incurred by the student. Factors like high utilization can also have a negative impact on the parent’s credit score. Understanding and discussing these risks is key to moving your student forward into the world of credit.
Alternatives to co-signing
If parents would rather not co-sign for a student’s credit card application, there is the alternative of adding an adult child as an authorized user to an existing card account. This can help parents give specific financial advice to their child and, being an authorized user adds to a student’s credit history.
Are credit cards good for college students?
It’s never too late or too early to learn the value of responsible credit use. The college life is already full of so many new and important responsibilities and building good credit is an important one to add to the list. When used responsibly, credit cards can help a student learn proper money management and build a line of credit that makes it easier to lease a decent apartment or put a down payment on a car.
How do you get a credit card for the first time?
This largely depends on your credit profile. If you’re like most people starting out, you might not have any credit history to speak of. In this case, you’ll probably need a parent to co-sign before you are considered for a credit card. You might also consider a secured credit card with your bank which is a great way to establish a healthy credit rapport.
How do credit cards work?
A credit card actually provides a short-term loan. A less-pleasant word for a loan is debt. When you purchase lunch at a restaurant with a credit card, the credit card company pays the restaurant right away on your behalf, then gives you roughly a month to pay them back. You are legally bound to pay back that loan.
How students get into credit card trouble
Sometimes, students make the mistake of getting in over their heads with high interest rates on outstanding balances. In order to help student avoid these and other common mistakes, we’ve put together some examples to learn from:
Mistake #1: Overspending
It is easy to forget you are going into debt when you first start using credit. You simply swipe the card and go on your merry way. Unfortunately, the small purchases you don’t remember making will add up over the weeks and months. If you don’t keep track of your purchases in real-time, you may spend far more than you planned. When this happens, you can easily get whacked with an over-the-limit fee or spiral into credit card debt that becomes unmanageable.
Mistake #2: Spending just to earn more rewards
Many credit cards let you earn rewards points that can be redeemed for merchandise, cash back, or travel. It may be tempting to maximize this feature, but you should only do so with caution. The fact is, spending to earn rewards is never beneficial because your unnecessary spending often costs more than the rewards you get back.
Mistake #3: Making only minimum payments
When you carry a credit card balance into the next month, your credit card issuer will ask you to make a minimum payment. This minimum payment is usually only a small fraction of the amount you owe, which can be tempting if you are tight on cash. However, it is important to remember that the balance you carry over will accrue interest and ultimately cost you more money over time.
How can college students establish a credit history fast?
- Always pay off the entire balance
- Always pay on time
- Automate payments
- Avoid applying for too many loans
- Increase your credit limit
How should I use my student credit card?
If you’re a college student and this is your first credit card, then you might be wondering how best to use it. The general rule of thumb most people will tell you is to only use a credit card in an emergency. However, one rule that tends to work out is to never use your student credit card for anything you can’t already afford. After all, you want to be able to build up your credit history and one of the best ways you can do that is to pay off your credited purchases on time (and ideally, in full).
You should also take advantage of the rewards programs and the signup bonuses (if there are any). If you’re buying groceries and your credit card offers a bonus on supermarket purchases, consider using it over the debit card or cash. Same for student credit cards offering rewards at gas stations. These are what we would call “everyday purchases” as they are more about necessity than things you can do without. Since you would have to pay for these things anyway, it’s a good way to build up your credit score by paying off the balance each month.
Student budget calculator
College presents a brand new world full of opportunities and responsibilities. For most students, those responsibilities include managing their own finances. However, it can be tough knowing where to start when it comes to formulating your own budget. That’s why we put together this handy student budget calculator for anyone who needs help managing their expenses
How can students use a credit card the right way?
If you want to learn how to truly use credit responsibly, it is best to start out slow and easy. You don’t need to rush into using credit exclusively, and would probably be better off making a few small transactions each month until you feel comfortable. Here are a few more tips that might make the transition smoother:
Start small with one card and a low limit
Since the most common credit card mistake that plagues students is overspending, it might be wise to begin the process with only one card that comes with a relatively low credit limit. For example, a student credit card with a $300 or $500 credit limit offers enough credit to let you get the hang of it without offering you so much credit that you risk going far into debt.
Make small everyday purchases, not extra purchases to get rewards
A common rookie mistake for students with a credit card is to deviate from their normal spending habits. Contrary to popular belief, making such outrageous purchases will not “jumpstart” your credit score. In fact, it could land you into some serious debt if you aren’t prepared to pay it all back. Instead, you should opt for a card that rewards your everyday spending and build your credit history naturally.
Understand your spending by analyzing the statement
After using your new student card for your first month, you can use the information you gain to understand your spending better. Unlike when you use cash, using credit creates a paper trail of every transaction you make. This paper trail, and the online budgeting tools the best student credit cards usually offer, make it easier to analyze your real spending and look for ways to improve it.
Pay off your balance each month
With most credit cards, you’ll be required to pay off a minimum amount of your outstanding balance. We recommend getting into the habit of paying off your balance in its entirety, every month. By doing this, you avoid getting hit with any high interest rates. It also looks good on paper as far as your credit score is concerned.
Research the best credit cards for students
There are so many choices for students when it comes to credit cards. Not only that, but each card also offers its own set of perks and caveats. How are you supposed to know which student credit card is right for you? That’s where our student credit cards directory can really help sum it all up.
Rewards Tier Level
No APR for 6+ Months
Good Ongoing Rewards
No Foreign Transaction Fee
Best credit cards for college students for 2018
- Discover it® Student Cash Back : Best rewards potential
- Discover it® Student chrome : Best for dining out and gas
- Capital One® Secured Mastercard® : Best for poor or no credit
- Journey® Student Rewards from Capital One® : Best for developing responsible credit habits