What is a Student Credit Card?
A student credit card is specially designed for students. Like a regular credit card, a student card has a certain credit limit that the cardholder can use. After a certain period, the borrower must return the amount taken from the credit card together with interest.
Unlike a traditional credit card, a student card has a smaller credit limit, has more favorable conditions for use abroad, and helps young people to start building credit.
Building Credit With Your Student Credit Card
A student credit card can be the first credit card for young people who are starting to build a loan. Borrowers with bad credit can also take this credit card to improve their credit.
This credit card sends data on the borrower's payment behavior to 3 credit bureaus, namely TransUnion, Experian, and Equifax. Thanks to this, the cardholder can regularly monitor changes in their credit report.
The student credit card was specially created for students who have little or no credit history. Therefore, the loan requirements from the lenders will not concern the students themselves but will concern their co-signers.
To establish good credit, the borrower needs to handle the credit card correctly. First of all, the cardholder must take such an amount from their credit limit that will not raise their credit utilization ratio above 20%. Only in this case, the borrower's credit scores will increase.
Another important factor for maintaining a good loan is to make timely payments on the loan. Each late payment damages the borrower's credit score. To avoid being late with payments, the borrower can set up automatic payments. Automatic payments will be made from the cardholder's bank account automatically using ACH debit. If you manage your student credit card responsibly, you can significantly increase your credit scores.
Pros and Сons
Pros
- Introductory interest rates. When a cardholder uses the credit limit for the first time, they have a certain period during which they do not need to make interest payments. Usually, this period lasts several months.
- Protected purchases. This protection can be used if the cardholder has problems with any purchase. For example, the product does not match the description or is defective.
- Allows building credit. Such a credit card has a small credit limit so that a young person can learn how to manage money properly and make payments on time. The cardholder may not have a credit history. In this case, the co-signer demonstrates their credit.
- Cash back or points rewards. Student credit cards offer holders different types of rewards. These rewards can be cashback or loyalty points, which can make using the card very profitable.
- No fees. Usually, college student credit cards do not require payment of the annual fee, while standard credit cards require this.
- Suitable for large purchases. A student who has such a credit card can make large purchases, for example, purchase devices for study immediately and pay for them later by dividing the price into equal monthly or bi-weekly payments.
- The requirements are not strict. A student can easily get such a credit card since lenders do not have high requirements for such borrowers.
Cons
- Interest rates are higher than standard credit cards. On average, such cards have an annual percentage rate (APR) of 18% to 28%. Interest rates are higher so that the borrower does not abuse the credit limit since the return of a large amount of money can be quite costly.
- Such credit cards have a lower credit limit because lenders do not trust borrowers without a credit history very much. Moreover, college students usually have a low level of income and would most likely not be able to pay off credit card debt at a high credit limit.
- Despite the absence of an annual fee, such a credit card has other fees. A student credit card may have cash withdrawal fees and late fees.
- Students without a co-signer with a good credit history may not be eligible for a credit card. The lender's refusal can damage the loan of a young borrower.
The Best Credit Cards For Students
Discover It Student Cash Back
The Discover It Student Cash Back is a good option for students who want to earn cash back rewards on their purchases while building their credit history. The card's matching cash back feature, no annual fee, and Freeze it feature are also attractive benefits. It's important to note the card's variable interest rate and late payment fee, which should be considered when determining if this card is a good fit for you.
Cardholders can earn 5% cash back on rotating categories each quarter and 1% unlimited cash back on all other purchases. Discover will match all the cash back earned by the end of the first year of card membership. Cardholders can freeze their account if their card is lost or stolen and unfreeze it when they find it.
The card does not require an annual fee. Late payment fee. The late payment fee is up to $40. The over-limit fee is $0, and the bank does not charge foreign transaction fees. The card has a variable purchase APR of 14.49% - 23.49%.
Bank of America Travel Rewards credit card for Students
The Bank of America Travel Rewards for students is good for students who want to earn rewards on their purchases while building their credit history. The card's unlimited rewards, no annual fee, and no foreign transaction fees are attractive benefits. It's important to note the card's variable interest rate and late payment fee, which should be considered when determining if this card is a good fit for you.
Cardholders can earn unlimited 1.5 points per $1 spent on all purchases. Points can be redeemed for travel-related expenses such as flights, hotels, and rental cars. Cardholders can access their account and manage their finances from their mobile devices.
The late payment fee is up to $39. The card has no annual fee and no over-limit fee. Cardholders can use the card internationally without being charged any foreign transaction fees. The card has a variable purchase APR of 19.24%.
Bank of America Unlimited Cash Rewards credit card for Students
The Bank of America Unlimited Cash Rewards for students is a suitable card for students who want to earn cash back rewards on their purchases while building their credit history. The card's unlimited rewards, no annual fee, and no foreign transaction fees are attractive benefits. It's important to note the card's variable interest rate and late payment fee, which should be considered when determining if this card is a good fit for you.
Cardholders can earn unlimited 1.5% cash back on all purchases. The interest rate on the card is a variable purchase APR of 19.24%. The late payment fee is up to $39. The card has no annual fee. Cardholders can use the card internationally without being charged any foreign transaction fees.
Capital One Quicksilver Student Cash Rewards
The Capital One Quicksilver Student Cash Rewards Credit Card is suitable for students who want to earn cash back rewards on their purchases while building their credit history. The card's unlimited rewards, no annual fee, and no foreign transaction fees are attractive benefits. It's important to note the card's variable interest rate and late payment fee, which should be considered when determining if this card is a good fit for you.
Cardholders can earn unlimited 1.5% cash back on all purchases. The card has a variable purchase APR of 19.24%. The card has no annual fee. The late payment fee is up to $39. Cardholders can use the card internationally without being charged any foreign transaction fees.
Capital One SavorOne Student Cash Rewards
The Capital One SavorOne Student Cash Rewards Credit Card is for students who want to earn cash back rewards on their dining and entertainment purchases, as well as on groceries and other purchases. The card's unlimited rewards, no annual fee, and no foreign transaction fees are attractive benefits. It's important to note the card's variable interest rate and late payment fee, which should be considered when determining if this card is a good fit for you.
The card has no annual fee. Cardholders can earn unlimited 3% cash back on dining and entertainment purchases, 2% cash back at grocery stores, and 1% cash back on all other purchases. The card has a variable purchase APR of 19.24%. The late payment fee is up to $39. Cardholders can use the card internationally without being charged any foreign transaction fees.
Deserve EDU Mastercard for Students
The Deserve EDU Mastercard for Students is a good option for students looking for a credit card with a straightforward rewards program and a low annual fee. The card's automatic credit line increase, Amazon Prime Student membership, and no foreign transaction fees are attractive benefits. However, it's important to consider the card's high interest rate and late payment fee before applying.
The card has no annual fee. The late payment fee is up to $39. The interest rate is a variable purchase APR of 19.99%. Cardholders can use the card internationally without being charged any foreign transaction fees.
Cardholders can earn 1% cash back on all purchases. You can receive a one-year Amazon Prime Student membership, which includes access to Amazon Prime Video, Amazon Prime Music, and more. There is an automatic credit line increase after making five monthly payments on time.
What Can You Do With Your Student Credit Card?
A student credit card can be used for various purchases that need to be made right now if such an amount is not in the account.
A student can use their credit limit to purchase books, devices, and other supplies that are necessary for college. A credit card is also needed in this case because it is possible to buy books online, and a credit card allows you to make online purchases.
Students can also use a credit card for rent payments. Usually, the owners of houses set a certain day for the tenants each month on which it is necessary to pay rent. If a student doesn't have enough funds on this day, they can use the credit limit of the card.
Students who travel or go to study for a short time on an exchange to another country can use the cash back in the travel category and receive rewards for each ticket purchase and hotel check-out. Moreover, student credit cards have a reduced foreign transaction fee, so they can be used abroad.
Young people can also use the card to pay for small purchases like gasoline, groceries, or public transport passes.
How To Get The Best Student Credit Card?
There are several factors that a potential borrower should consider before choosing a suitable credit card for them.
The annual percentage rate (APR) should be low. The interest rate for a student credit card is already higher than that of a standard one, so the borrower should look for an option that offers the lowest APR.
If the borrower does not pay off the balance every month, they may need to make a minimum repayment. It is usually about 3% of the balance. The borrower is recommended to find a lender who offers the lowest minimum repayment.
Most student credit cards do not require an annual fee. However, some options may still have such a fee, so the borrower needs to pay attention to this point.
One of the major aspects that a borrower should pay attention to when choosing a student credit card is the introductory interest rates. The borrower needs to look for an option that offers the longest initial period with 0% APR.
The size of rewards and cashback is also worth comparing carefully. Some credit cards may offer increased cash back on purchases of certain categories.
Applying For a Student Credit Card
How to Choose a Bank
Choosing the right credit card issuers to open a student credit card is as important as choosing the card itself.
To compare loan offers, the borrower needs to get pre-qualification from as many different lenders as possible. To do this, they need to have all the necessary information and documentation to apply for a card on various lenders' websites. It is possible to compare credit conditions by studying all loan agreements in detail.
Studying offers from different lenders, the borrower needs to pay attention to the availability and size of additional fees. These fees can be late fees, prepayment penalties, foreign transaction fees, and ATM cash withdrawal fees.
Recommendations on the Eligibility
Since a student credit card carries the function of a credit card for building a loan, lenders do not have credit requirements for borrowers.
The borrower must be at least 21 years old to obtain a student credit card. A borrower who is under 21 years of age must apply to open a credit card with a co-signer. According to the Credit Card Act of 2009, a borrower under the age of 21 must have a co-signer who can provide the lender with a provable stable source of income to cover the borrower's debts in case of lack of funds.
The borrower must be a US citizen or permanent resident and must be enrolled in a US college or university for any program.
The borrower must have some source of income. A student can apply for a credit card if he has a full-time or part-time job or receives regular money transfers from his parents. As proof of income, the borrower or co-signer can provide bank statements, pay stubs, tax returns, or W-2s.
The Application Process
To apply for a student credit card, a potential borrower needs to go to the lender's website and click on the "Get Started" or "Apply Now" button. Next, the borrower needs to enter his personal information, such as name, home address, phone number, and email. Next, the borrower needs to enter his age. Suppose the borrower is under 21 years old, then in the next window of the form. In that case, they need to fill in personal information and information about the income level and employment status of a co-signer who is over 21 years old. If the borrower is 21 years old or older, they also need to enter information about their employment status and income level. After filling in all the data, the borrower needs to upload the documents necessary to confirm income if the lender asks for it.
Alternatives To Student Credit Cards
If a student credit card is not the financial solution that suits the borrower, they can pay attention to several alternatives.
Secured credit cards can be a suitable replacement for student credit cards. To have a credit limit on a secured credit card, the borrower needs to make a security deposit. The credit limit of the cardholder will be equal to their deposit. Such credit cards often have a lower interest rate than student cards. This is suitable for borrowers with savings who want to start building credit.
Checking account alternative cards are debit cards and are well suited for those students who receive money transfers from their parents. Parents have access to setting up a student's account and can even set spending limits. This will help teach the student how to manage money properly.
