College Student Cards
Once they hit college, students face a lot of new adjustments from choosing a course of study that can very well define their career to preparing themselves for independent living. Along the way, they may also be looking to pick up money management skills and to start using a credit card, perhaps to begin establishing credit. We present several credit cards for college students that are suitable choices for those who wish to build their credit while earning rewards in the process. What's more, many of these cards aim to reward good credit card habits by offering more attractive perks when certain requirements are met.
The Pros & Cons of College Student Cards
Our first few credit cards taught us a few things -- that there are right and wrong ways to use them. Like anything else, there are pros and cons to using a student credit card. Let's review some of these points:
The Pros
For students, one big benefit that credit cards provide is the convenience that they offer when there are emergencies. Who knows what emergencies a student will encounter, and it is comforting to know that your college student can be financially covered with a credit card in such cases. Typical scenarios might include vehicle breakdowns and attendant car repairs and towing expenses, motel bills, meals, doctor charges, or midnight apartment repairs, such as water leaks. But impromptu trips to the Bahamas certainly don't qualify as an emergency!
Having a student credit card will help your child learn how to be financially responsible and will also help them develop a credit history.
Here are some ways to start off on the right footing with your college student: Teach your kids to use a credit card only if they can pay off their balance in full each month. Point out that using a card for installment payments is a no-no. Other good habits to develop include keeping one's balance below the credit limit and always paying on time.
Finally, show your kids that by using a credit card in the "right" way, they can potentially receive rewards; and using cards irresponsibly can lead to financial problems later. Making these distinctions early should help your child develop a healthy outlook on debt, credit and money management.
The Cons
One of the biggest arguments against credit cards for students is the potential for these cards to get an unsuspecting teen into financial trouble. There's the potential to develop bad money habits when you own a credit card: one month of not paying off your balance can easily snowball into something more problematic, and where can that lead you? When you accumulate debt early in your life, it's a problem that becomes much harder to surmount.
A student may end up with several credit cards, repeating the same mistakes with each one. It therefore goes without saying that credit cards should be used with caution especially when a student is first starting out as a card holder. If you're a parent, you must first determine if your child is ready to start using a card, and before you give them the green light for this, lay down your ground rules well in advance.
Helpful Credit Card Tips For Students
Thanks to the credit card legislation passed in 2009, student credit cards have become more of a challenge to get if you are under the age of 21. As a matter of fact, the Credit CARD Act even cracks down on the mere presence of credit card offers on college campuses nationwide. So, how do students gain access to credit cards and how can they learn how to use cards the smart way?
- Maintain a healthy credit score. If you've been successful with establishing a credit history that can be considered satisfactory, perhaps through personal loans you've made or through the use of a secured credit card, then you may be qualified to own a regular credit card that caters to college students. These cards may not require a co-signer if you've got good credit and have more benefits and rewards available to card owners.
- If a card requires it, then get a co-signer. If a true credit card is what you want, there are some that will require a co-signer. Credit card companies will open new card accounts for students under the age of 21, but some have this requirement. For such cards, the need for a co-signer poses a unique dilemma for students whose parents are not creditworthy enough to help with a credit card application. While there is no law that dictates who can co-sign a student credit card application, many issuers only accept immediate family members as co-signers.
- Piggyback with care. This process involves becoming an authorized user on someone else’s account and has been used for years by individuals looking to better their credit scores by utilizing someone else’s good payment habits. Piggybacking on a family member’s account allows you to establish a good credit history early (as long as the individual you are piggybacking off of maintains a good payment history) and allows you to have a card issued in your name that you can use for emergencies or other authorized purchases. The main drawback to this approach is the co-dependent nature of the relationship. The account holder’s credit can be affected if you buy things irresponsibly. Or your credit can be affected if the cardholder is unable to make his or her regularly scheduled payments on time or exceeds the credit limit regularly.
- Open a prepaid credit card account. While these accounts do not afford a student the luxury of tapping into a line of credit, this may not be a bad thing. In the past, many students not only graduated college with student loan debt, but many were also saddled with hefty credit card payments as well. If you're a college student, opening a prepaid credit card account will help you avoid taking on this expensive debt while owning a secured credit card will help you boost your credit score. Some issuers such as American Express and MetaBank are even offering rewards programs for their prepaid credit cards. Once you've earned a reasonable credit score, you may consider applying for regular student credit cards that have stricter requirements.
While many students look forward to the freedom that having a credit card affords them, there are some who may not realize the magnitude of irresponsible spending. For those students who are lucky enough to obtain a student credit card, prudent spending habits must be established early on in order to prevent credit problems in the future.
{ 18 comments… read them below or add one }
I have the Citi mtvU card and I can give a positive testimonial for it. It’s a great card catered to students. Wholly recommended!
Ahhhh, credit card for college kids, where it all begins 🙂
I just have one rule, and that is: Don’t get a credit card if you aren’t working.
Good luck kids! Better to spend now and overextend yourself earlier rather than when you’re making money in a full-time job. More painful later in life!
The Discover Student Card and Citi Forward are a close first and second. One thing I love about the Discover Student Card is that its reward system is the same as the More card, so you’re really getting all of the benefits of Discover’s premiere card, but obviously the APR is a bit higher because it is a student card.
@Eric and CreditShout
I’ve always had good experiences with Citi cards. For those less familiar with the Citi Forward card — it just got introduced in the past year, and aims to reward its cardholders for good behavior. So in that sense, this card is “unique”.
@Financial Samurai,
Yes, credit cards for kids is a debatable issue, but exposure to this has to start somewhere (at the very least, for the education). I received my first card in my early 20′s without the benefit of some “guidelines” except for one: do not use your card unless you know you can pay it off completely every month. And this piece of advice just stuck. I’ve never wavered because I always equated card use with cash use.
If you imagine more cash flowing out whenever you pull your card out at a cash register (than if you simply used cash), maybe it will deter you from using the credit card as often.
@SVB – Yep, I agree. I don’t necessarily think it’s bad to expose young folks to the allure of credit cards early. It really is better to mess around and have some slip ups before things get out of hand.
When I say “don’t get until you work”, I mean working during college. As soon as you start working during college, you recognize the value of money more (b/c $8-9/hr is kinda painful), and you won’t go overboard in CC spending.
I have the Discover card, not sure if it’s the student one or the “Open Road” one – but I use it strictly for gas/auto repairs. I’m able to pay it off in full each month, and it’s really worked out great when my transmission went out last month and not everything was covered by insurance 🙁
Regardless, I’d recommend that one for anyone looking for an introductory credit card to start to build their line of credit.
Just my two cents: If you get a CC, use it for one or two routine purchases and that’s IT. i.e. gas, groceries, etc.
@ Financial Samurai
You make a great point in that some well meaning parents simply pay off all of their kids’ credit card bills which although it is beneficial in that it helps them build credit history, it is disastrous in teaching the kids how to manage credit responsibly.
Citi was my first credit card as a college student, and I had no complaints. Fortunately, I didn’t get into debt problems, and it allowed me to build by credit history early on. Financial Samurai’s suggestion to only get a card if you have a job is a great tip. It was my job in college that kept my debt under control.
Credit cards for students have been used by lots of young adults to build credit score. However they should learn how to manage their accounts and should limit their use of it to avoid big debt problems in the future.
New laws affecting the credit card industry my soon make getting a credit card as a student a thing of the past. New laws will require the student to have a job or a parents co-signature to apply for a credit card. The best option will be going with a pre-paid credit card such as the Mango MasterCard that has no fees with a monthly deposit. These types of cards will allow students to still have the benefits of a credit card for online purchases, gas, food, etc. while parents have the ability to re-load the card, watch their students spending and help teach the student money management and responsible spending without the huge interest fees and other drawbacks of a traditional credit card for students.
Only get a credit card if you have money to pay for it later or if you’re parent are financially well. But it is more advisable to get a credit card if you are already working and can pay for your debts responsibly.
Student cards can be dangerous in the wrong hands but I started out with them right after I got my first job. I made some bad mistakes but learned things the hard way.
@Carrie. I agree with you 125%. Credit cards are dangerous and students often get into trouble with cards right away. The Credit card issuers know that they can feed on students and parents will often bail them out. And schools are in on this too, including Yale University, which accepts payments for allowing credit cards to come on campus. Is there any Credit Card 101 class being taught yet? I doubt it.
I remember my first credit card. My parents received the bill and paid it, but I also saw the bill. After seeing the bill a few months in, I cut back dramatically, because I started to realize I was overspending. I had already started to log my cash expenses the first month of school and started to log credit card expenses as well.
Great list. I’ve given my son a credit card to only be used for emergencies like car repairs, health bills. It has a small credit line so he can’t get too carried away also.
There’s some news now that reports that a Federal Reserve study reveals a drop in college affiliated credit cards, or those credit cards that are issued through a college or university. We can thank the CardACT for this — but this means they are tightening the screws on cards being marketed to younger people. How does this bode for student cards?
Should your college student own a credit card? I’m a parent so this is a good question. I remember when I first applied for and finally received my first credit card. It was a big deal and I felt that I just made a huge step. I believe that it can be helpful for someone to become exposed to using a credit card early — with caveats — depending on how ready for this exposure the individual is. With the appropriate guidance and guidelines, using the right kind of credit card can prove to be a helpful financial tool for a student.
Note that what distinguishes a student credit card from all other cards is that they offer lower interest rates and a lower spending limit than regular credit cards.
I am a firm believer that one’s money management habits are forged at a young age. I believe that anyone can learn how to manage money and understand credit cards while in college or shortly thereafter. But on the flip side, if you aren’t savvy with money or tend to hang out with friends who are spendthrifts, you may end up developing some bad habits. If you are a student and want credit, you need to understand what you are getting into. It would be great if all of us learned about money management and paid more attention to the basics of credit card use right when we start using credit cards.
It’s particularly important that students realize that the no interest offers on these cards don’t go on forever. Once the teaser rate expires, the cards will get new rates that are set based on factors like your credit history. So while it’s great that these cards can be had even if your credit isn’t perfect (being a student is taken into consideration) and that they’re no annual fee cards, you have to make sure you know how to handle credit so you don’t get started on the road of carrying persistent debt like so many people have.