While college students may need their own credit cards for a number of reasons, the most important reason is to establish and build a positive credit history. However, if handled improperly, credit cards can have an extremely negative impact, and can result in an overwhelming mountain of debt.
As a student, it’s important to choose a credit card that you can easily manage. Furthermore, you must restrain yourself from overspending, and always pay your balances in full and on time. The best options on the market have minimal fees, yet provide student-friendly benefits, as well as excellent opportunities to build credit.
Best Credit Cards for College Students
Low Fees; 5% Cash Back on Purchases in Rotating Categories
Similar to the standard version, the Discover it for Students has very few fees and offers an opportunity to earn cash back on purchases. There is no late payment fee for the first offense and your APR does not increase, allowing students some leeway to learn the ropes.
- Sign-up Bonus. You receive a bonus of $20 when you are approved for the Discover it for Students card.
- Fees. There is no annual fee, foreign transaction fee, or penalty APR. The balance transfer fee is 3%. There is no late payment fee on the first late payment, but after that a fee of up to $35 is applied.
- APR. The APR on purchases ranges from 12.99% to 21.99%, based on your creditworthiness. The balance transfer APR is 10.99% for six months on transfers that post to your account by a set deadline. After that, it is 12.99% to 21.99% and varies according to the prime rate.
- Student Card Benefits. Sign up for quarterly rotating categories – such as restaurants or holiday shopping – and receive 5% cash back for those purchases and 1% cash back for all others. The cap on each of the rotating categories is usually $1,500 in purchases. Also, the Discover it for Students is one of the rare student credit cards that does not charge a foreign transaction fee – which could be very beneficial for students who study abroad.
Introductory APR of 0% on Purchases for 7 Months; 5% Cash Back in Rotating Categories
The Citi Dividend Card for College Students is similar to the Discover it for Students because of its cash back rewards program. You can earn cash back on purchases made in rotating categories that you are likely to spend in anyway. The biggest difference between the two cards, however, is that the Citi Dividend card imposes a foreign transaction fee and a late payment fee. Also, the Citi Dividend is a Visa card, which may be accepted more than a Discover card.
- Sign-up Bonus. There is no sign-up bonus.
- Fees. There is no annual fee. The balance transfer fee is 4% or $5 and the foreign transaction fee is 3%. The late payment fee is as much as $35.
- APR. The introductory APR of 0% for 7 months applies to purchases but not balance transfers. After that, the purchase APR is 13.99%, 18.99%, or 23.99% depending on your creditworthiness and the prime rate. The same APR applies to balance transfers.
- Student Card Benefits. The Citi Dividend Card for College Students includes a rewards program that gives 5% cash back on purchases made in quarterly rotating categories such as drug stores, fitness clubs, and any purchases made at Macy’s, and 1% on everything else. You do need to enroll in these categories each quarter in order to earn your 5%. There is a cash back cap of $300 per year unless you shop through the Citi Bonus Cash Center which awards an unlimited amount. Another feature is Citi Price Rewind, which monitors and tracks online purchases you’ve made with the card. If a lower price is found within 30 days of the original purchase date, you receive the difference as a refund.
See our Citi Dividend Card for College Students Review for more information.
0% Introductory APR on Balance Transfers and Purchases for 12 Months; 10% Cash Back Rewards With Upromise
A partnering of Sallie Mae’s Upromise program and Barclays Bank, this card provides a cash back rewards program, options for investing in a Sallie Mae savings plan, and the ability to use rewards to pay down student loans, making it a stellar card for college students.
- Sign-up Bonus. There is a bonus of $25 cash back when you make your first purchase, cash advance, or balance transfer with the card.
- Fees. There is no annual fee. During the first 12 billing cycles, the balance transfer fee is 3% or $10, whichever is greater. After that, it is the greater of 4% or $10. The foreign transaction fee is 3%, and the late payment fee is as high as $35.
- APR. There is an introductory APR of 0% on purchases and balance transfers for 12 billing cycles after the account is opened. After that, the APR is between 12.99% and 20.99% based on creditworthiness and variations in the prime rate.
- Student Card Benefits. The Upromise MasterCard allows you to earn up to 10% cash back when shopping online with Upromise retailers such as Macy’s, Sears, and Best Buy. It offers 4% cash back at Upromise restaurants, 3% cash back on gasoline purchases at Exxon or Mobil, 2% cash back at Motion Picture Theaters movie theaters, and 1% on all other purchases. There is no limit to the amount of cash back that can be earned. Additionally, you can use your cash back to pay your Sallie Mae student loan, invest in savings accounts or tax-deferred 529 plans, or simply request a check for cash.
Introductory APR of 0% on Balance Transfers and Purchases for 15 Months
The BankAmericard Credit Card for Students offers a no-frills approach. While there are no rewards for purchases, you do get one of the longest 0% introductory APRs available on balance transfers and purchases. However, keep in mind that in order to avoid interest, your balance needs to be paid off before the introductory period ends.
- Sign-up Bonus. There is no sign-up bonus.
- Fees. There is no annual fee. The balance transfer fee is 3% or $10, whichever is greater. The foreign transaction fee is 3%. The late payment fee is as high as $35.
- APR. There is an introductory APR of 0% on purchases and balance transfers for 15 statement closing dates. After that, the APR ranges from 10.99% to 20.99% based on your creditworthiness and the prime rate. The 15-month, 0% introductory APR is one of the longest available for both student cards and standard credit cards.
- Student Card Benefits. The BankAmericard Credit Card for Students also offers access to Ultimate Money Skills, a feature designed to help you budget and build credit. The program consists of various finance articles and interactive tools such as the Banking Simulator which teaches online and mobile banking, and provides resources covering everything you need to start building and maintaining a positive credit history.
No Fees; Unlimited 1% Cash Back
Despite the industry trend, students with credit scores under 700 can still qualify for rewards cards, sometimes in exchange for a higher APR. Capital One Journey Student Rewards is a great card for students with average credit scores – around the mid-600s – who are diligent about paying their balances in full each month and want to earn rewards on purchases.
- Sign-up Bonus. There is no sign-up bonus.
- Fees. There is no annual fee, no balance transfer fee, no overlimit fee, and no foreign transaction fee.
- APR. The APR for the Capital One Journey Student Rewards card is 19.8% on purchases and balance transfers and varies based on the prime rate.
- Student Card Benefits. The Capital One Journey Student Rewards card awards an unlimited, flat 1% cash back on all purchases made with the card. This is handy if you don’t want to manage rotating categories or plan your spending every quarter. However, as an extra incentive to make payments on time, you also receive a bonus of 25% of the 1% cash back you earn in each billing cycle that your account is not past due. In other words, if you pay your balance on time each month, you earn a total of 1.25% on all purchases, which is higher than the standard 1% of other rewards cards.
Important Credit Card Tips for College Students
1. Find a Basic Credit Card
Credit card companies have hundreds of products on the market, offered with every imaginable feature. As a student, look for the most manageable cards you can find. By using streamlined products, you have fewer terms and conditions to follow, and you can avoid costly mistakes.
2. Always Pay Balances in Full
Responsible use of a credit card includes paying your minimum balance every month. Banks reap the benefits if you only pay the minimum balance on your credit cards, as they receive a stream of income from interest payments and enjoy a minimized risk of default. For students, paying anything other than the entire balance in full every month sets a disastrous precedent. You may begin to look at your purchases as a series of monthly payments, without appreciating the eventual total cost of the items purchased. As many students begin to purchase items that they cannot afford, there becomes a psychological disconnect between income and spending. This can become an extremely costly lifelong habit that is difficult to overcome.
3. Avoid Overspending
You may find it tempting to spend more than you have once you have a credit card. Avoid the temptation by using credit cards sparingly and never buying items that would be out of reach without credit cards. If the credit card company offers to increase the credit card limit, turn it down unless you pay off the statement balance in full each month. Try to avoid using the card except for emergency situations or only using the card to pay for hotels, rental cars, and other services that require a card.
4. Take Advantage of Parental Guidance
Have an involved discussion with your parents before applying for a credit card. The conversation should include reviewing the card’s terms and conditions, fees, interest rates, and most importantly, the cardholder’s responsibilities when using the card. Roleplaying what to do when a friend or roommate wants to borrow the card, or when the credit card company offers increased limits, should also be part of the discussion.
5. Keep Credit Cards Safe
Keep credit cards safe and secure at all times. Credit cards should never be left unattended in order to avoid becoming an identity theft victim. Before making any purchase online, verify that websites are secure. In addition, monitor your credit history by ordering your free annual credit reports. You should immediately report any unusual activity on your credit cards to the credit bureaus as well.
6. Keep Credit Card and Bank Accounts at the Same Institution
It may be a good idea to keep your savings, checking, and credit card accounts at one bank. This way, you only have to go to one place to see all of your account information. Payments can be simple by using instant transfers between accounts, rather than making payments or writing checks to another institution.
7. Use One Credit Card
Limit yourself to a single credit card at first. This allows you to get in the habit of receiving, examining, and paying your credit card bills on time. Choosing a general Visa or a MasterCard instead of a gas credit card or a department store credit card ensures that only one card is needed, since these cards can be used almost anywhere credit cards are accepted. Only after you’ve demonstrated a track record of responsible payments should you consider applying for an additional card with complementary features.
8. Remember the CARD Act of 2009
Credit card issuers have undertaken the strategy of getting customers hooked on their products in ways that could potentially cause them great harm in the future. In an attempt to restrain the banks’ predatory behavior, Congress included several provisions designed to protect students in credit card industry regulations (i.e. CARD Act of 2009). Applicants under 21 years of age must show proof of income before they can open an account in their own name, or have a co-signer. Students under 21 years old who are authorized users on an adult’s account may not increase their credit limit without the adult’s permission. Finally, banks can no longer market credit card products to students by giving away free merchandise.
9. Never Use a Co-Signer
Students under 21 can circumvent the banks’ requirements by having an older friend or relative co-sign their application. The co-signer is the equivalent of someone who buys alcohol for underage drinkers. Co-signing a loan is not illegal, but it is a terrible idea. Both parties risk their money and their credit history in this situation. The most honest, hardworking person can still lose his or her job, miss payments, or have emergency expenses that can negatively impact the cardholder and the co-signer.
10. Avoid Rewards Cards
The popularity of cash back credit cards and travel rewards credit cards has skyrocketed, and many credit cards offer cash back and free travel as bonuses. As a student, you should focus on finding credit cards with low interest rates, instead of applying for cards with rewards. Earning a reward for spending money does not set a good precedent for students. In addition, students generally do not earn or spend much money, so any reward points, miles, or cash back received will likely be insignificant.
11. Don’t Finance Tuition With a Credit Card
There are few trends in personal finance more troubling than hearing about students who finance their college education by charging their tuition to their credit cards. Credit cards offer terrible interest rates and, in most cases, subject all purchases to interest when you carry a balance. Additionally, you can receive education-related tax deductions for the interest on your student loans, but you won’t benefit when your tuition is charged to a credit card and the card accumulates interest charges.
12. Look for Cards without Annual Fees
Without the prospect of earning many rewards, paying an annual fee is unlikely to be a worthy expense. Look for cards with no annual fees.
13. Consider Secured Credit Cards
Students who have credit problems should consider applying for a secured credit card. This is a product that combines many of the features of a standard credit card with the inherent constraints of a debit card. A secured credit card is backed by funds deposited by the cardholder into an account. That amount becomes your credit limit, and acts as security for the card. Students using secured credit cards can’t spend too much money or go into debt. Secured credit cards include chargeback protection, and the ability for cardholders to build their credit. It is also easier to travel, as many hotels and rental car companies only accept credit cards.
Credit card options for college students are limited, and in order to help build a positive credit rating you have to consider the types of purchases you most frequently make and the fees involved for carrying a given card. For example, if you need to transfer balances, choose cards that waive balance transfer fees and provide 0% introductory rates. If you’re planning to study abroad, opt for credit cards with no foreign transaction fees. Most importantly, however, be mindful of paying your balance on time and in full each month (rather than just the minimum payment due) in order to avoid interest charges and a potentially negative impact on your credit rating.
Which credit card for college students would you recommend?