College students have a lot on their minds – from homework and midterms to socializing and extracurricular activities. I know, since I now have a daughter in college and she often has a jam-packed schedule that seems to never quit.
With so much to do, it’s not surprising that college students often overlook the topic of their credit rating or fail to consider the pros and cons of a credit card.
The truth is, credit cards can help college students establish a solid credit rating and learn the art of managing credit and debt wisely. That first or second credit card can also assist young adults in preparing to rent an apartment, finance a new car or even get a job since many employers now perform credit checks on job applicants.
But credit-card use by college students shouldn’t be taken lightly nor should students accept just any old card offer they come across.
Here are five of the best credit cards on the market for college students today.
This is an excellent no-annual-fee card that can help a young adult who is first learning to manage credit wisely. To incentivize college students to make their payments on time, Capital One rewards users of this card in two ways. First, cardholders get a higher credit limit after they make five consecutive monthly payments. Additionally, the Journey® Student Rewards from Capital One® card starts out with a flat 1 percent cash back on all purchases, but raises that cash-back rate to 1.25 percent after the cardholder shows he or she is responsible enough to pay the bill in a timely fashion. The no-foreign-transaction fee on this card will also be a bonus for students who study abroad.
(This card is not currently available on CardRatings)
Another great credit card pick for college students is the no-annual-fee Discover it® Student chrome. In addition to awarding 2 percent cash back on up to $1,000 worth of gas and restaurant purchases each quarter, what makes this card appealing for those seeking their degrees is the forgiving benefits built into the card. If the student cardholder is busy studying or taking finals and accidentally pays a bill late, no worries; there’s no late fee on that first payment. Also, the card has a no-penalty interest rate, which could, again, help those who are just learning to stay on top of monthly credit card bills and may slip up now and again with payments. Another perk: Discover rewards good grades. Students with a 3.0 or better grade point average get $20 statement credit for each year they maintain those high marks.
Citi ThankYou® Preferred Card for College Students
(This card is not currently available on CardRatings)
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Undergraduates and grad students alike will appreciate the outstanding benefits attached to the Citi ThankYou® Preferred Card for College Students. It has no annual fee, which is easy on a student’s budget. It also gives users double ThankYou® Points for spending on entertainment and dining purchases as well as 1 point per dollar spent everywhere else – like those runs to Target or Walmart to furnish a dorm room or buy groceries. Those ThankYou® Points can be redeemed in a variety of places and ways, such as on travel reservations to get home during the holidays or get away for the summer, gift cards or even to make loan repayments. That’s a smart way to help college students lower their debt levels.
College students who know they’ll be traveling a lot – either because they’re out-of-state students or perhaps they’re doing a study abroad program – will love this card. It has a 0 percent APR for the first 12 billing cycles, no annual fee or foreign transaction fees and it includes several noteworthy travel incentives for those who travel often or study abroad. Among these perks: Cardholders get 1.5 points per dollar spent, and points can be redeemed for travel reservations. Also, new cardholders who spend $1,000 on qualifying purchases within 90 days of the account opening receive 20,000 bonus points that can be redeemed for a $200 statement credit toward travel purchases.
Like the rest of its peers in this group, this card has no annual fee. Since nearly all college students text and use digital services, U.S. Bank offers personalized mobile alerts and reminders to help students pay bills on time and handle credit responsibly. Finally, another nice feature with this card is the overdraft protection option, which offers an automatic funds transfer from a U.S. Bank College Visa® into a checking account should an overdraft occur.
No matter what card you or your student chooses, you should know a few things about the application process and how to help college students make a smooth transition to establishing their own credit rating.
Before signing for credit cards, it is very important, Parents, to review the terms and conditions with your college-age child so there’s a thorough understanding of what owning the card entails. Also, be sure to educate them about how their credit score will affect their financial future.
As a safeguard for college students, the federal CARD Act of 2009 prevents banks and other lenders from issuing credit cards to individuals younger than 21 unless the borrower can prove he or she has the means to pay (i.e. a job) OR has a willing co-signer (that would be you, Mom and Dad).
If you’ve determined that your student is responsible with money and can consistently manage to pay off credit card balances before the end of each month, consider the benefits of a student credit card. Besides extending a line of credit, these cards offer rewards such as cash back on certain types of purchases, airline miles and other discounts for travel.
And as with any credit card, make sure to read the fine print for information about annual fees, interest rates and other terms.
Whether you add your child to one of your credit accounts or you advise him or her to apply for a separate credit card, it's important to talk to your college-age child about the prudent use of credit and when credit cards shouldn't be used.
It's far too easy to lose track of money spent while in college with tuition bills each year, not to mention books, supplies, food and other expenses.
It’s helpful to create realistic spending limits and urge your child to stick to those limits. You might consider recommending that your child avoid using credit cards for routine day-to-day purchases (like meals) that could easily be paid for with cash. Ditto for big-ticket items that he or she may not be able to pay off within the month.
Similarly, if you want your child to use the credit card for emergencies only, say so.
Despite the high credit card bills often racked up by college students, those four years spent earning a degree don’t have to burden your young adult child with unmanageable debt in addition to student loans. In fact, starting a college student off on the right foot with responsible credit card use can be a stepping stone that helps ensure future credit worthiness and encourages good financial habits in the years ahead.
Still searching for the right card? Click here to compare student credit cards side by side.