Since the Credit CARD Act was signed into law a decade ago, it’s become more challenging for college students to get approved for their very own credit card. Here’s what you need to know about why it’s more difficult nowadays and what you can do to improve your chances of getting approved.
Getting a credit card as a college student can help you establish a credit history and learn how to use credit responsibly.
And if the pandemic hurt you financially, now might be a great time to investigate getting one to jumpstart your journey on the road to financial health.
But since the Credit CARD Act was signed into law more than a decade ago, it’s become more and more difficult for college students to get approved for their very own cards.
Considering signing up for a credit card? Here’s why it’s more difficult nowadays and what you can do to improve your chances of getting approved.
How the CARD Act changed the game
Prior to the CARD Act, getting a credit card as a college student was relatively easy.
Each term, card issuers descended on college campuses, handing out free food and swag in exchange for completed credit card applications – and you didn’t need significant income or even a job to qualify.
When the law was passed, however, the federal government created several consumer provisions that would protect students from getting a credit card before they were financially ready.
For starters, applicants younger than 21 could no longer get approved without either having a co-signer or being able to prove an ability to repay any debt they incurred.
Also, card issuers were no longer allowed to market their products to students within 1,000 feet of college campuses and couldn’t offer free stuff as an incentive to apply.
The result is that while there are plenty of student credit cards on the market, many students will have a hard time getting one – at least not without knowing what to look for.
“Credit scores are used to make decisions about almost everything, from cellphones to apartments and loans,” said Laks Vasudevan, senior vice president of consumer card product management at Huntington National Bank.
“So, it’s important for college students to start building a strong credit history early on,” she added.
While it’s possible to achieve this goal without credit cards, it’s not a bad idea to learn how to start using them responsibly. Below are steps you can take to improve your chances of getting one.
Know if you qualify
Before you can apply for a credit card, make sure you meet the issuer’s general requirements, which typically include:
- You must be currently enrolled in college (one exception is the Journey Student Rewards from Capital One).
- You must be at least 18 years old and show that you earn income. If you have no income at all, your best bet may be to apply for a credit card from an issuer that allows co-signers or joint account holders.
- You must be a U.S. citizen and you should have a Social Security number.
- You must pass a credit check.
Review your credit report
The information in your credit report is what the three credit bureaus use to calculate your score, so it’s important that it’s accurate.
- Order your free report from the three major bureaus from AnnualCreditReport.com.
- Review your report carefully and immediately report any inaccuracies.
- If your credit score is low, take steps to improve it so you’ll be able to access the best cards and lowest interest rates.
It’s important to look at a number of student credit cards to make sure you choose the one that best fits your spending habits and lifestyle. Here are some things to evaluate when you’re comparing:
- Many cards come with annual fees, foreign transaction fees and even setup or monthly maintenance fees. Choose the card with the least number of fees to save money.
- Do you like to earn cash back rewards? Miles? Points? Once you decide, look for a card that rewards you for the things that you spend the most on, such as groceries or gas.
Look into alternative credit products
In addition to an income requirement, some student credit cards may also require at least some credit history to get approved. Without a credit card, though, there aren’t many other opportunities for young adults to establish a credit history.
Fortunately, there are some relatively new products on the market that consider alternative credit data to make an approval decision.
- The Petal® 2 “Cash Back, No Fees” Visa® Credit Card, for instance, will consider your credit history if you have one. But if you don’t, you’ll be asked to link your bank accounts during the application process, and Petal will look at how you manage your money through income, expenses and saving habits to determine your financial responsibility and the likelihood that you’ll pay your bills on time. If you’re approved, the card also charges no fees whatsoever, offers a credit limit from $300 up to $10,000 and provides cash back rewards.
- The Petal® 1 “No Annual Fee” Visa® Credit Card is a good card for building credit and offers a credit limit from $300 up to $5,000. It, too, may factor in alternative financial information such as your bill payment history and income, which could result in a higher credit limit and lower APR.
- The Deserve® EDU Mastercard for Students is another option to consider. Instead of judging your application based solely on your credit and income, the card’s issuer also considers your school, your major and the likelihood of your graduating and getting a job.
Apply for a card
Once you zero in on the card you want, apply for it. The easiest way is to fill out the application online. You might get approved immediately or you might have to wait for a decision to come in the mail. Before you apply, be sure you have everything you need:
- Your Social Security number
- Your monthly housing payment
- Your contact information
- All income (this includes deposits in a shared account)
The CARD Act is an important law that helps protect college students from getting in over their heads too easily.
But while student credit cards nowadays are designed specifically with college students in mind, being in school isn’t enough to get approved on its own.
As you figure out how to maximize the amount of income you can claim on your application, consider alternative credit products and seek out a co-signer. You’ll have a better chance of getting the right card for you to begin building your credit history.