Although we celebrate college life as a relatively safe place to survive poor decisions, a blemish on your credit history can actually cause more damage than a drunken, late night tattoo.
That's because the relationship you build with banks during the first few years of your adult life directly impact the kinds of job offers you'll get, the kinds of credit card deals you'll qualify for, and the amount of interest you'll pay on a home loan.
Under current banking regulations, students must wait until after they reach age 21 to apply for a credit card in their own name. Even then, a student must show that he or she has access to enough income to pay down the a card's potential balance to qualify for an offer. Therefore, instead of shopping for a card with the highest limit or the lowest annual percentage rate, look for cards with:
- No annual fee. According to credit scoring experts at FICO, the length of your oldest active line of credit can impact your credit score. You can keep a no-annual-fee card open without impacting your household budget for years after you graduate, especially if you don't use it for regular transactions.
- No co-signer requirement. Although some parents eagerly co-sign on lines of credit with their college-age kids, these arrangements can lead to awkward situations and credit report damage. It's better to take a smaller line of credit on your own than to share a larger pool of potential debt with a loved one. Some banks use proprietary data models -- based on your home ZIP code, your school, or even your major -- to estimate your earning potential over the next few years.
- Clear communication. College students move frequently and change routines often. Therefore, banks with proactive payment reminders and transaction alerts help keep student borrowers from triggering late fees and penalties.
- Bonus perks and privileges. Instead of settling for the first offer you see, hunt for special deals that can earn rewards for the types of purchases you make often.
- Rewards or rebates. It's a great time to learn how to use credit cards as tools for financial security instead of getting into debt. Rack up the biggest rebates when you pretend your credit card's a debit card and pay your balance in full every month.
- A "graduation" program. The best student credit cards offer paths for cardholders to graduate into their full-service products after a year or two of responsible usage.
Based on those criteria, our editorial team recommends checking out the following student credit cards:
JourneySM Student Rewards from Capital One®
Cardholders earn 1 percent cash back on nearly all transactions, regardless of category. You can also earn a 25 percent bonus on the cash back you've earned every month you pay this card's balance on time. Gain access to a higher credit line after making your first five monthly payments on time. With no annual fee, no foreign transaction fee, and access to Capital One's online tracking and redemption tools, this card makes a great companion on campus and on the road.
Discover it® chrome for Students
This variant on Discover's flagship cash-back credit card doubles its cash-back rate to 2 percent on up to $1,000 per quarter in combined purchases at gas stations and restaurants. You'll earn 1 percent cash back on all other purchases, and can now apply your cash-back rewards when shopping at Amazon.com. You can stash your rewards until it's time to pay for textbooks, or just use those credits toward a semester-end splurge.
Citi ThankYou® Preferred Card for College Students - Earn 2,500 Bonus Points
Citi's entrant in the student credit card race doubles its ThankYou® Points per dollar spent on purchases for dining at restaurants and entertainment, but it's this card's customization features that earn it a spot in our lineup. Citi allows cardholders to choose their own payment due date, a feature sure to be appreciated by those planning around a monthly grant deposit, work-study check, or gift from the family.
Wells Fargo Cash BackSM College Card
Wells Fargo eases new cardholders into a monthly routine with this card, featuring a reduced introductory purchase APR (5.9% - 13.9% for 6 months on purchases, then depending on your credit qualification, an APR from 11.15% - 21.15% , which varies with the market based on the U.S. prime rate) and some bonus rewards (3 percent cash back on gas, grocery and drugstore purchases) during the first six months. After that, this card, which charges no annual fee, settles in with a 1 percent cash-back rebate, automatically redeemable in $25 increments to a linked checking or savings account or as a statement credit. Wells Fargo even includes a cellphone protection plan for customers who pay their mobile phone bills with the card each month.
U.S. Bank College Visa® Card
The U.S. Bank College Visa Card lands on our list because of its innovative approach to preventing late fees and minimizing finance charges. This card's FlexControl free online tool lets you set controls that determine when and how to pay off certain charges automatically, or whether you want to set up routine repayments on larger purchases. It's an easy way to get the security of credit card transactions while pretending you're using a debit card. Plus, this card charges no annual fee.
State Farm® Student Visa® Credit Card
Although it might seem weird to get a credit card from your insurance company, State Farm offers one of the lowest purchase APR ranges on the market for student credit cards (currently a variable rate of 11.24 percent to 18.24 percent, based on creditworthiness). If you or your family already insures your car or property through the company, your local agent can help process your application by verifying your income and identity.
Your local bank or credit union
If your family's been banking with a small community bank or credit union, you can leverage that relationship in an attempt to qualify for a no-frills card that doesn't charge an annual fee. However, you don't have to sacrifice features or service when you sign up with a neighborhood bank. Most small financial institutions actually outsource their credit card servicing to companies with nationwide operations.
For instance, a company called Elan Financial Services manages student credit card programs for regional banks such as Comerica Bank, Susquehanna Bank, and Frontier Bank. ICBA Bancard manages similar programs for community banks across the country. Many of these programs use offers, rewards, and even marketing collateral that's identical from bank to bank. Check the fine print on your application to learn whether agent banks like these are really issuing your prospective credit card.