Student credit cards can create a path to more valuable credit offers down the road. With smaller credit limits, unique incentives, credit building power, and major perks tailored to those attending college, it’s an option worth considering for any and all students.
With that said, there are some key things to take into account when selecting the best card. As noted by Forbes, the Credit CARD Act of 2009 stipulates that credit cards cannot be issued to anyone under 21 unless a parent or guardian cosigns for them or they have an independent income.
Once you qualify, the rest will be up to you (or, if you’re under 21, your parents.) The trick, of course, is knowing what to look for.
If you’re not sure where to start, don’t sweat it. We’re here to help with useful insights from financial experts.
Know the Must-Have Features
The best student credit cards are geared specifically to their needs. Oftentimes, they come with higher interest rates, but there’s a good reason for that. Most students opening a credit card are at the start of their credit history, and that makes them an unknown risk for card issuers.
You need credit to establish credit, so all student credit cards take into account that the person applying may walk in with next to none.
Kimbree Redburn, a financial coach and accredited financial counselor who runs the firm Illuminate Financial, says there are a few key features she advises that college students look for in a credit card.
Firstly, find a card with no annual fee. “There are so many cards out there that do not charge annual fees that it often is not worth paying an annual fee unless the perks associated with the card are too good to pass up,” she explains.
Redburn also suggests selecting a credit card without foreign transaction fees. This will be important to consider for any student who may travel abroad, as having a card with no foreign transaction fees will undoubtedly allow them to save a significant chunk of change on their transactions abroad.
Explore the Rewards Each Card Offers
The other thing worth considering is what rewards each card offers. Take cashback cards, for instance. “They are very useful because you can use the cash to go towards a statement balance or get a check. This can help someone who is just learning to manage credit make the most of their card,” Redburn notes.
No matter the card you choose, one of the biggest longtime rewards is that you’ll be able to start building your credit in a reliable way. Take this student credit card for example. Redburn recommends the Capital One Journey Student Rewards Credit Card.
“With this card, a student will get 1% cashback on all purchases. This is helpful because there are no rotating categories to keep track of or sign up for to earn cashback. If the cardholder makes their monthly payment on time they receive an additional .25% cashback so cashback rewards could total 1.25% each month.”
Cards like the Capital One Journey Student Rewards Card create the incentive to make payments on time. In the long run, consistently paying on any credit cards like this will be crucial to establish, grow, and maintain their credit.
Redburn explains, “payment history accounts for 35% of an individual’s FICO score, so paying on time is key to building good credit.”
Also of note, this particular card has no annual fee and boasts no foreign transaction fees. The majority of student credit cards available can all help students build credit and learn good habits in a variety of ways, but this card is more appealing than most when you take the offered rewards and lack of fees combination into account.
Know Your Best Options
Connor Brown, the Founder of After School Finance, also notes that Capital One has a few excellent credit card options available to students.
“If the student doesn’t have any credit, or has bad credit, then the secured Capital One Mastercard is a good option. What’s great about this is that after a year you can call them to get it converted to a regular credit card,” he explains.
For those with decent credit scores, Brown recommends the Capital One Journey credit card. With this option, students can earn cash back on purchases. On top of that, there’s no annual fee. Lastly, Brown notes the Discover it card as a good alternative for students.
According to the financial expert, “I actually like this one better than the Capital One Journey card. While you also get cashback with this Discover card, the percentage can be higher in some categories from month to month compared to the Capital One card.” However, bear in mind that more places will accept Mastercard than Discover.
If you have zero credit history, don’t fret. There are plenty of options that cater most specifically to students in that situation.
Where to Start if You Have No Credit History
Building your credit history takes time. Unfortunately, building your credit requires having some established credit. It’s the ultimate catch 22. The good news is, there are options to overcome this obstacle with ease. Best of all, most of them are specifically geared towards college students.
For those with no credit history, the Deserve EDU Mastercard for Students is worth looking into. This $0-annual-fee card comes with some unique perks and determines eligibility based on basic things like bank accounts and contact information. In some student scenarios, this could majorly come in handy.
For instance, international students won’t be required to provide a Social Security number to apply. It reports to all three bureaus, offers student-oriented rewards, and with no transaction fees, it’s a great option for those planning to study abroad.
Don’t be scared to apply for credit because you’ve previously been rejected. Just know the cards you’re better off applying for. Many who’ve been rejected by other credit institutions say that the OpenSky Credit Card is 100% worth looking into. The odds could very well be in your favor.
Statistically, it’s one of the few and special cards that basically anybody can get approved for. This is because it’s a secured credit card. And frankly, there’s no safer bet.
The Benefits of Secured Credit Cards
Secured credit cards are set up with a credit limit equal to the money you put in. With this secured credit card, the credit limit is increased by your down payment. While safer than your average credit card, it functions exactly like one, and it’s a great way to build credit with very little risk.
The annual fee for the OpenSky Credit Card is only $35 a year. Typically, those using this credit card aim to start out with a set up minimum credit limit of $200. Another benefit of a card like this one is there’s the possibility of avoiding interest altogether.
If this is a route you might take, try to pay off the credit card at the end of each billing cycle. You’ll set yourself up for a strong credit history out the gate.
Tommy Pederson is a believer in the OpenSky Credit Card. He shared with us that “[s]howing that you are able to use credit responsibly and pay it off- even as a college kid- has gone miles in the credit cards, loans, and financing options I have.”
Pederson struggled as a college student to establish his financial independence before discovering the card. “I used to be scared to apply for credit because I always used to get rejected,” he said. “Now, I get surprised if they don’t approve me instantly. As a college student still, this credit card has been my savior.
Most regular credit cards will require you to use them to keep your credit in check, but not this one. Cards like the OpenSky don’t typically monitor your account for activity. In turn, you don’t need to use it to build or maintain credit, which is a great perk for students. After all, there will be plenty of other things to worry about in college.
Your credit card should be a helpful tool, not an unnecessary source of stress.
For those starting out without any credit, there’s another notable benefit to a card like this. Since secured credit cards like OpenSky are not based on your credit history or income, you don’t need a full-time job to qualify. And it’s a great way to build a strong credit score from the ground up.
Opening a card like this one will lead to better approval odds for other credit cards with higher limits, including Discover and Capital One.
Students who swear by secured cards like this one often go from “not qualifying” to “instantly approved” before graduation. With the odds forever in your favor, you should start looking into secured credit card options today.
Make Sure You’re Building Your Credit
Lastly (and ideally), you should select a student credit card that reports to the three major credit bureaus. If it doesn’t report to TransUnion, Equifax, and Experian, you might want to reconsider. Here’s why.
As noted by NerdWallet, these three companies are the ones who record all information used to calculate your credit scores. You’ll only be able to build your score into the best it can be if the card you choose reports to the bureaus that matter. So be sure that it does.
Per NerdWallet, “a good FICO credit score of 690 or higher can qualify you for lower interest rates on auto or home loans, saving you money over time. It may also help you qualify for your first apartment.” So consider the options with your future in mind.
Having higher credit scores means greater financial freedom and opportunities following graduation. So if and when you open a student credit card, use it wisely.