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The Best Credit Cards for
College Students Building a Good Credit History While Still in School

Establishing a good credit history helps lay the foundation for many of the milestones of adulthood — such as buying a home, getting a business loan or even landing a dream job. College students can get a head start on building good credit by using a credit card — but it’s vital to take the responsibility seriously and not let it backfire. This guide provides information to help students choose the right credit card to meet their needs, and to use it the right way once it arrives.

Meet the Experts

James Philpot Associate Professor, Missouri State University
Dawnielle Gladden Pacheco Founder, Budget Overhaul
Freddie Huynh Vice President of Credit Risk Analytics, Freedom Financial Network

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Frequently Asked Questions: Credit Cards Edition

Getting a credit card is a big responsibility and it can be a tricky one. Following are some of the most common questions students may have.

How exactly does a credit card work?

Using a magnetic strip or RFID chip, credit cards are electronically linked to a financial account and can be used to pay for goods and services. Unlike a debit card, a credit card does not draw funds from the cardholder’s bank account; instead, consumers may use a certain amount of money — a credit line — supplied by the issuer of the card. They must pay at least some portion back at the end of the month or face fees. Any unpaid balance — even after a minimum payment — is charged interest.

An APR, or annual percentage rate, is the amount of interest applied to credit card balances each month. Some cards provide a lower introductory APR to new cardholders for a certain time period. In addition, a higher penalty rate may be imposed if a cardholder doesn’t make minimum monthly payments.

Some cards charge an annual fee simply to hold the card, in addition to any other fees.

A secured credit card requires a deposit, equal to the credit limit, as a form of collateral. The cardholder is still required to make monthly payments but can use the cards to build their credit history. Unsecured cards, which are more common, don’t require a deposit.

A cosigner agrees to pay the balance of an account if the primary card holder doesn’t. Having a cosigner often makes it easier for someone with no credit history to obtain credit.

A credit history is the record of the debt someone holds, which is tracked by the credit bureaus Equifax, Experian and TransUnion. Credit card companies report account information to credit bureaus, so the history of on-time or late payments is documented. Good credit makes it easier to obtain several types of loans and can even be a factor in landing a job.

A credit score is a three-digit number, from 300 to 850, which indicates what someone’s credit history looks like. Scores are influenced by factors such as the number of credit cards someone has, whether payments have been made on time and what the account balances are. People with a higher credit score usually receive more favorable terms on credit cards and loans.

Credit card rewards are the incentives companies offer to entice consumers to open a credit account. Rewards typically include cash back on qualified purchases, frequent flier points and discounts on certain products.

Benefits and Drawbacks of Credit Cards

Credit cards lure thousands of new users each year, but they come with a decided risk for people who fail to use them responsibly. Is it worth it for college students? We took a side-by-side look at the advantages weighed against the potential pitfalls.

Benefits

  • Creating credit history and routine.

    Students can use a credit card to build a solid credit history, as well as to develop responsible habits in terms of managing and keeping track of their finances.

  • Cash-back rewards.

    Cash-back rewards — a small percentage offered on purchases — can mean a bit of savings to users who faithfully pay their balance in full each month.

  • Convenience

    Credit cards are useful — and often necessary — for certain types of transactions, such as airline or hotel reservations. Many also offer protections for problems during travel, or for fraudulent activity.

Drawbacks

  • Potential to ruin credit.

    Bills that aren’t paid on time not only rack up fees and interest charges, they can destroy a person’s credit before it ever gets off the ground.

  • High interest rates.

    Credit cards typically have much higher interest rates than other types of loans, so debt can accumulate quickly if balances aren’t paid off.

  • Missing out on discounts.

    Old-fashioned cash payments can sometimes be the better financial choice. Vendors are charged by credit card companies for transactions, and smaller companies in particular may offer discounts to customers to avoid cards.

Expert Perspectives on Credit Cards

Credit cards lure thousands of new users each year, but they come with a decided risk for people who fail to use them responsibly. Is it worth it for college students? We took a side-by-side look at the advantages weighed against the potential pitfalls.

James Philpot, associate professor at Missouri State University who directs the financial planning major program.

Dawnielle Gladden Pacheco, founder of Budget Overhaul LLC.

Freddie Huynh, vice president of credit risk analytics with Freedom Financial Network.

What should college students look for when choosing a credit card?

One of the first steps is to not get too eager when applying for a credit card, Huynh advises. “Research shows that trying to open several credit accounts in a short period represents greater credit risk,” he says. “There is a relationship between credit risk and the number of credit inquiries: The more inquiries one has, the more likely he or she is to default on credit obligations.”

To narrow the field, look for the most obvious perks, such as no annual fee and cash-back rewards, which you know you’ll take advantage of. A low interest rate is another thing to consider. All three experts recommended paying balances in full each month, which makes the rate less important, but if you think you might slip, a lower interest can cushion the fall. Pacheco advises looking for a card with an introductory zero percent interest rate. “Zero percent interest cards are usually for a limited time, like six months or a year, so a card like this is good for a student to test their ability to pay their credit card off in full each month,” she says.

What should college students avoid when choosing a credit card?

High annual fees are a red flag, says Philpot, as are promotional perks that look good but aren’t that applicable to daily life — such as airline miles when you know you won’t be traveling. And even though introductory interest rates for purchases and balance transfers can be tempting, it’s important to be aware that they will expire — and you’d better be ready when they do.

If students don’t have enough income to cover expenses, it’s best to avoid applying for credit. “College is a time of self-discovery for many people,” says Pacheco. “Honestly evaluate yourself, and if you know that you are bad or inconsistent with managing money, avoid getting a traditional (unsecured) credit card and opt for a secured credit card. Or simply focus on using your debit card and avoid a credit card for the time being altogether.”

Getting a cosigner is a way to put a safety net in place, and in fact, credit card companies cannot issue cards to applicants under age 21 without an adult cosigner or proof of adequate income. However, Huynh says, “It is more than possible to manage finances well, and start to build credit, with a checking account and no credit card. If the student can qualify for a credit card without a cosigner, that is a better route. If the card is a vehicle for a student to develop their credit history, doing it independently will be a far better teaching mechanism than having a fallback cosigner.”

What are some tips for college students on using credit cards responsibly?

It’s best to know your limits and pay attention. Pacheco advises applying only for as much credit as you know you can handle to pay off balances in full each month — any more is an invitation for trouble. Make a budget and use your phone to send text or email reminders of when charges are due. Philpot offers the following advice: “Use the card regularly, but sparingly. For example, use the card only for gasoline purchases; this limits the purchases yet shows regular activity. Later creditors like to see this.”

Huynh notes that setting clear parameters for a card can help. “Some families agree on a student having a credit card for emergencies only. Some parents provide a set monthly amount that can be spent. In other cases, students are completely responsible for all purchases and payments,” he says. “Whatever the rules are, it can be a smart idea for students to avoid using a credit card for discretionary expenses such as clothing, movies, coffee, dining out or happy hours.”

If students have not used credit cards responsibly, what can be done to correct the situation?

It’s best to set a budget before beginning to use a credit card, but if it’s not working, try again, keeping things as simple as possible so you’re less likely to get off track. Students who know they’re likely to give into spending temptations can take other precautions, such as starting with a secured credit card, or by not carrying it around regularly. Make a pact with yourself to only use it for real emergencies. Even low-tech methods like freezing the card in a block of ice can be effective; the time it takes to thaw is enough to reconsider — and perhaps resist — an impulse buy. However, “Think twice about canceling a credit card with a long positive history,” says Huynh says. “The longer you hold a card, the more valuable it is in your credit score determination.”

If you get into deeper trouble, don’t try to avoid the problem. “See a credit counselor,” advises Philpot. “They can give you specific advice for your situation. The most reputable ones are not-for-profit organizations and do not charge fees. And talk to your credit card issuers. Lenders generally would rather work with their troubled borrowers than let them go into default. The lender may be able to lower your rate, change your payment calendar, etc.”

What else should college students should keep in mind about credit cards?

Approaching credit card use wisely can be convenient, economical and a way to build a sound financial history. But they’re tools in a financial process, not gifts of free money. “In the tool analogy, they are like a table saw,” warns Philpot. “With careful and skilled use, a table saw can do wonders; under reckless use it will amputate fingers and limbs.”

Eventually, credit use — good or bad — will catch up with everyone. College students in particular have a chance to establish their history for a smoother financial road in the future — as long as they stay savvy about the risks.

2018 Spotlight:
10 Best Credit Cards for College Students

There are many different credit cards available, but only a few are ideal choices to meet the financial circumstances and goals of college students. Following are the 10 best credit cards college students can use to help them build their credit history.

Bank of America Cash Rewards Credit Card for Students

This card offers different cash-back percentages depending on the purchase: 2 percent on groceries, 3 percent on gas, and 1 percent on all other purchases. Also, users can get $150 in online cash rewards, as well as regular access to their credit score for free. There’s no annual fee.

Bank of America Travel Rewards Credit Card for Students

People who sign up can get help with travel expenses, which may be useful for students who study abroad. Users earn 1.5 points for every $1 they spend, and there are no restrictions on how travel rewards can be used, so students need not worry about blackout dates.

Capital One Secured Mastercard

This secured credit card allows users to get an initial credit line of $200 with a refundable deposit of $49, $99, or $200, and they can increase their credit line after they have made five consecutive on-time payments. The card provides benefits such as travel assistance services, roadside assistance, auto rental insurance and an extended warranty for products. Users pick their own monthly due date.

Capital One Platinum Credit Card

This card provides a number of perks, including tools allowing users to conveniently check their credit score and card balance, as well as access to auto rental insurance, travel assistance services and travel accident insurance. In addition, users aren’t held responsible for any fraudulent charges made on their card. There’s no annual fee, and the credit limit can be increased after making five on-time payments in a row.

Citi Double Cash Card

Card members can earn cash-back rewards twice: they get 1 percent when they make a purchase, and another 1 percent on those same items if they make at least the minimum payment due. In addition, people can earn $100 cash back if they spend $500 on their card within the first three months of opening their account. Additional benefits include assistance with identity theft and fraud, a lost wallet service and free tickets to movie screenings.

Citi ThankYou Preferred Card for College Students

This card has no annual fee and no annual percentage rate for purchases made in the first seven months of getting the card. Users receive two points for purchases related to dining and entertainment, and one point for all other purchases, as well as 2,500 points if they spend $500 within the first three months of opening their account. In addition, this card provides easy online access to account information, the ability to choose the payment due date and protection from unauthorized charges.

Deserve Edu Mastercard For Students

This card gives students access to discounted supplies, textbooks and personal care items through a free subscription to Amazon Prime Student. Other benefits include price protection, travel assistance services and identity theft protection. The card also has no annual fee and no fees for foreign transactions.

Discover it Chrome Card for College Students

This card rewards students for excelling in school by providing a $20 credit for each year students achieve at least a 3.0 GPA. Users can also receive 2 percent cash back on gas and dining, and 1 percent on everything else. In addition, cash-back rewards are matched during the first year of membership.

Discover it Secured Card

Students can open this card, which has no annual fee, by putting down a refundable deposit. Member services include monthly access to their credit score, and monitoring of the internet to ensure their Social Security number does not appear on risky websites. Also, the card provides cash-back rewards on every purchase.

Journey Student Rewards from Capital One

With this card, users pay no annual fee, and receive fraud coverage, cash-back rewards and unlimited credit score access. Members become eligible for a higher credit line after paying their bill on time for five consecutive months.

More on Credit Cards

Navigating the world of credit cards shouldn’t be taken lightly. The following resources can help students understand what’s involved so they can make smart financial choices.

Provides information on what college students with credit cards shouldn’t do.

Offers information on establishing credit, budgeting and taking advantage of student discounts.

In this podcast, Jenny Hoff, the managing editor of CreditCards.com, interviews financial and credit experts. Topics covered include credit card rewards, ways to improve a credit score and how to deal with debt.

In this episode, host Trent Hamm discusses how he got out of credit card debt and provides tips on how to do the same.

This video provides information targeted to new users.

Provides tips on how to responsibly use credit cards and build a good credit history.

Class that covers how credit works, the role of credit in people’s lives and how credit can be used responsibly.

Discover provides advice on how to choose a credit card, use it responsibly and establish a good credit score.

Offers tips on credit card use, including strategically paying off balances, getting the most out of credit card rewards and checking credit reports.