If you think getting into college is stressful, finding the right student credit card can potentially add to that stress. But it doesn’t have to be that way if you know your way around. Before you apply for your first (or next) student credit card, check out this helpful guide to explain the entire process. Here’s how to choose the best student credit card for your needs.
At a Glance
- Student credit cards differ from traditional cards – from easier approval odds to lower credit limits and student-centric perks like good grade discounts.
- Focusing on the annual fee, APR, and account fees is a great way to prioritize your financial health, as these factors can save you significant money over time.
- Look for a student credit card that grows with you by considering a student version of a popular rewards card. This allows you to graduate to a regular version and keep your rewards.
What’s the Difference Between a Regular Credit Card and a Student Credit Card?
A credit card is a payment tool that can help you purchase goods and services using a line of credit from a financial institution, such as your local bank. You can find a credit card application on your bank’s website or in your mailbox at home. Still, as of 2009, credit card issuers cannot market their products within 1,000 feet of a college campus.
The Credit Card Act of 2009 makes it illegal to coerce students to apply for credit cards using things like giveaways. Instead, a new type of credit card – the student credit card – was born. A student credit card differs from a traditional credit card in that it provides more straightforward application requirements, lower credit limits, and rewards that work well with students’ everyday needs.
Approval Odds
Students often have limited or no credit history, making getting approved for a credit card challenging. Look for student credit cards specifically designed for individuals with limited credit or who are just getting started building out their credit history. These cards usually have relaxed approval requirements and may offer features that cater to students.
Here’s what you’ll likely need before you apply for a student credit card:
| Common Requirements for Student Credit Cards | |||
|---|---|---|---|
| Income | Student credit cards are specifically designed for young adults in college or high school and are a great way to start building credit. These cards often have lower credit limits and more relaxed requirements than other credit cards, making them easier to obtain. Despite that, applying for a student credit card without any credit history can be challenging. Before you reach age 21, it can be tough to meet minimum income eligibility requirements – even for student credit cards. That’s because you can only use your own personal income to qualify. | ||
| Enrollment | Another key eligibility requirement for student cards is the need to be actively enrolled in college. Pay attention to the issuer-specific rules of each bank, as they may differ considerably. Discover, for instance, requires applicants to be “enrolled in a two- or four-year college or university.” Fortunately, the eligibility requirements for enrollment are fairly broad – even for Discover – meaning many full-time students should have no concerns about this form of eligibility. | ||
| Nationality | Many credit card issuers have specific rules regarding nationality and credit card applications. That is, they tend to require applicants to be a United States citizen. But credit card residency requirements can be confusing – especially if you are a citizen of an American territory, like Puerto Rico or Guam. While many territorial citizens can apply for credit cards, some banks have rules to the contrary. Another possibility for non-citizens is to apply using an Individual Taxpayer Identification Number. An Individual Taxpayer Identification Number (ITIN) is an ID number that the IRS issues to anyone who needs to file income tax returns in the United States but doesn’t qualify for a Social Security Number (SSN). | ||
Rewards
When evaluating student credit cards, consider their rewards and decide if they work for your spending habits. Student credit cards offer basic rewards, typically around 1% to 1.5% cash back, or 1X points/miles per dollar spent on purchases. That said, plenty of robust student rewards credit cards remain, including impressive options from Bank of America, Capital One, and Discover.
Pay close attention to the earning rate of rewards, caps on bonus points, and expiration of those rewards. Look for a student credit card that offers rewards in proprietary rewards programs, like Chase Ultimate Rewards, American Express Membership Rewards, or other transferrable currencies.
Rates & Fees
Interest charges and annual fees aren’t the most attractive features of a student credit card – but that doesn’t mean you should ignore them. To keep costs in check, opt for a student credit card with no annual fee or a low annual fee that won’t burden your budget. Additionally, look for a credit card with a competitive APR, as this can save you money if you need to carry a balance. While responsible credit card usage involves paying balances in full each month, having a card with a low ongoing interest rate can be beneficial in emergencies or unexpected circumstances.
You should also examine the card’s fees to understand if there are charges for the following transactions:
- Balance transfers
- Cash advances
- Foreign transactions
- Penalty APR
- Late fees
- Over-the-limit fees
Also, see if the card offers a grace period on late payments. A generous grace period allows you to make purchases without incurring interest charges if you pay your statement balance in full by the due date.
Credit Limit
Consider the credit limit offered by the credit card company. Most student credit cards have a modest spending limit, typically less than $1,500 (usually around $500). While it should be sufficient to meet your needs, remember that having a higher credit limit doesn’t mean you should max it out. Responsible credit usage is key to building good credit.
Summing It Up
Finding the right student credit card for you doesn’t have to be the equivalent of a year-end essay. By focusing on the key factors, such as academic incentives, rewards, fees, and approval odds, you can determine which credit cards offer you the right mix of benefits and which miss the mark. As a refresher, here’s what you should look for when shopping around for a new card:
| ① Rewards | While not common, there are plenty of good student rewards cards on the market. Many student credit cards feature lesser benefits in comparison to general rewards credit cards, but that’s not always the case. |
| ② No annual fee | Generally speaking, signing up for a credit card without an annual fee makes financial sense. This rule doesn’t apply, though, if the benefits that you earn while using the credit card are higher than the cost you’re paying each year. |
| ③ Academic incentives | This is a perk unique to credit cards for students. Some cards offer cardholders account statement credits if their grades meet a certain threshold, such as meeting GPA minimums each academic school year. |
| ④ Debt forgiveness | When learning how to use credit cards and navigate debt, especially at a young age, it’s essential to look for a card that offers debt forgiveness. You’ll want a card with debt forgiveness to prevent your credit score from being negatively affected. |
