As a college student, I didn’t have a credit card. I considered myself to be pretty responsible with money ― I worked part-time for a financial planner, after all ― and a credit card seemed like an unnecessary temptation to overspend. Sure, I racked up more overdraft fees in my checking account than I care to admit. But hey, at least I was debt-free.
So you can imagine my surprise when, at the age of 22, I decided I was ready for my very first real adult credit card, yet couldn’t get approved for one. It turns out you need to use credit to get credit ― something no one ever bothered to tell me.
In order to avoid this frustrating Catch-22, you should start using credit as early as possible. And considering that student credit cards can have some pretty great perks, college is the perfect time to get started.
Building Credit In College
Americans now collectively owe a staggering $1.5 trillion in student loans, so young adults would be smart to avoid any situation that lands them deeper in debt. But the truth is that our society is built on borrowing money, and if you avoid credit completely in college, you could end up having a tough time accomplishing basic financial goals once you’re out.
That’s not to say you should resign yourself to a life of debt. A credit card can be a tool or a trap, depending on how you use it.
“Credit cards should be viewed as a tool to start building credit rather than as ‘free money,’” said Keri Danielski, a consumer finance expert and spokeswoman for Intuit’s money management tool Mint. “It’s important that students start building good habits such as paying bills in full, on time, creating budgets (and sticking to them) and managing their credit scores.”
In other words, the goal is to start practicing good financial habits now before you have to navigate the “real world” all on your own. It’s not to use credit cards as a crutch or a means to buy things you can’t actually afford.
So now with that admonition out of the way, let’s take a look at how, exactly, you go about picking the best credit card.
What To Look For In A Student Credit Card
One of the advantages of getting a credit card as a college student is that you can qualify for student credit cards. These cards are certainly not all great, but many generally offer perks that benefit students specifically. Here’s what you should look for in a student credit card ― or any credit card, for that matter:
1. Low-interest rate: Ideally, you should pay the entire balance on your card every month so you don’t accrue any interest charges. But just in case you do need to carry a balance over to the next month, you can minimize the amount of interest you’re charged by choosing a card with a low APR. Currently, the average student credit card APR is 13.14 percent. Keep in mind that as a college student without much credit history, you might not be able to qualify for the lowest rates. However, the APR is a good comparison point when you evaluate different offers.
2. No annual fees: Some credit cards will charge a yearly fee of anywhere from $25 to $500, usually because the cards offer some sort of rewards program or special perks. However, there are plenty of free rewards cards on the market, so there’s really no good reason to choose a credit card that charges an annual fee.
3. Adequate credit limit: You credit limit is the maximum amount of money you’re allowed to have charged to the card at any given time. “Most student credit cards have low credit limits, often around $500,” said Danielski. It’s important to choose a card with a limit that’s high enough for you to manage expenses, but not so high that you could end up in hot water if you run up a balance.
4. Rewards: As mentioned, there are a ton of rewards credit cards available today, which let you earn points for spending on certain categories that you can redeem for merchandise, travel and more. Student credit cards in particular often offer rewards on purchases that college students are more likely to make. “Pick the rewards system that works best for you,” said Danielski. “If you live off campus and buy your own groceries, then 5 percent cash back at grocery stores may be a good reward for you.”
5. Other perks: In addition to rewards points, some student credit cards offer additional incentives and benefits. For example, some cards will give you extra rewards for paying your bill on time or for maintaining good grades. Although it’s not a requirement, you should consider a card that offers these types of perks when deciding which one to pick.
Our Picks For The Best Student Credit Cards
With all the credit cards out there, narrowing down your options can feel overwhelming. So if you’re not sure where to start, we selected a few of the top student credit cards available right now to get you started.
Best overall rewards: Discover It Chrome for Students
This student credit card from Discover offers some of the best rewards around. You can earn 2 percent cash back on up to $1,000 in combined purchases at gas stations and restaurants each quarter. Plus, you earn 1 percent back on all other purchases. As an added bonus, Discover will match all the rewards you earned in the first year. And each school year you maintain a GPA of 3.0 or better, you’ll be credited back $20 on your account.
Best introductory APR: Bank of America’s BankAmericard Credit Card for Students
If your top concern is avoiding interest charges, this card could be a great choice. According to Bank of America, this card offers one of the lowest APRs of all their cards. In fact, you pay 0 percent APR (as in, no interest at all) for the first 15 months.
Best incentives for responsible use: Journey Student Credit Card from Capital One
In addition to earning 1 percent cash back on all purchases, Capital One will bump up your rewards rate to 1.25 percent for paying your bill on time. After five months of on-time payments, you can also qualify for a credit line increase.
Best for international students: Deserve Edu Mastercard
If you’re an international student, there are other considerations when choosing a credit card. This student card is designed specifically for international students and doesn’t require a Social Security number to apply. The rewards are also generous: Not only do you get a free Amazon Prime student membership, but you earn 3 percent back on travel and entertainment, 2 percent back on restaurants and 1 percent back on all other purchases.
Best secured card: Discover It Secured
If you have no credit history at all or maybe even poor credit from a slip-up in the past, there’s a chance you might not be able to get approved for a traditional credit card. Don’t worry if that’s the case; consider getting a secured card instead.
A secured credit card works similarly to a regular credit card except that you pay a deposit up front. That deposit serves as your “line of credit.” By paying your bill on time each month, you’ll improve your credit score and eventually be able to graduate to a traditional card.
Discover offers a solid secured card option, which provides all the same rewards and benefits of the traditional Discover It Chrome card outlined above.
The Dos And Don’ts Of Managing Your Card
Once you’ve chosen the right card for you, the real challenge is using it correctly so you don’t accidentally harm your credit score. Here are the dos and don’ts you should keep in mind as you use your new credit card.
Don’t: Miss payments. Missing payments is just about the worst thing you can do for your wallet and your credit. Late payment fees can be as high as $27, and payment history accounts for 35 percent of your credit score. Even just one missed payment can have a damaging effect, so be sure to make all your payments by the due date.
Do: Keep your balance low. Even though you have a credit limit, it’s really not a good idea to use it all. How much you owe in relation to the credit you have available ― which is called your credit utilization ratio ― makes up 30 percent of your credit score. The lower your balance, the better. And maxing out your card is a definite no-no. Not only will it harm your score, but it will also make it tougher to pay it off.
Don’t: Spend without a plan. Since you want your credit card to work for you and not against you, it’s important to use it strategically. For instance, maybe you only charge one recurring monthly payment to the card to keep it active, and always pay it off immediately. Or maybe you save your card for food purchases only to reap the rewards points. In any case, have a plan for your credit card spending. You can use a tool like Mint to keep tabs on your spending and ensure it stays in line with your overall budget.
Do: Pay the whole balance. Credit card debt can sneak up on you. It might not seem like a big deal to carry a balance to the next month, but if it becomes a habit, that interest has a snowball effect. “Compound interest ― when interest is charged on interest ― quickly adds up and a few months of not paying off your credit card balance is especially harmful,” said Danielski. Be sure you know your card’s APR and do your best not to accrue interest if possible.
Don’t: Forget it’s not free money. Keep in mind that purchases you make with a credit card still have to be paid back out of your pocket. “A credit card is not an excuse to buy a new laptop, take a weekend trip or go on a shopping spree,” said Danielski. “All the money you charge on a credit card will be your responsibility, whether you pay for it now or later.”