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Student credit cards and young credit

Sallie Mae pitching new cash back cards to millennials and Gen Z

The student lender’s cards reward good financial behavior, but how do they stack up against other cash back and student cards?

Summary

Sallie Mae is pitching a brand-new slate of credit cards to students and recent grads – many of whom still owe money for their college educations. We took a closer look at what sets them apart from other cards designed for students and grads, and how they stack up against the competition.

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If you graduated from college sometime in the last few decades or so, there’s a good chance you’ve borrowed from Sallie Mae.

Even if you didn’t, you likely came across its name while trying to figure out how to finance your education. A giant in the student loan space, Sallie Mae has been lending to college students since the 1970s.

Now, in an aggressive effort to cement itself as more than just a student loan company, Sallie Mae is pitching a brand-new slate of credit cards to students and recent grads – many of whom still owe money for their college educations.

Replacing the now-defunct Sallie Mae Mastercard, the new Sallie Mae cards will be offered alongside other banking products aimed at a younger audience, such as Sallie Mae’s goal-oriented free online savings account, Smarty Pig. (Disclosure: this writer contributed personal finance content to Sallie Mae in 2014 and 2015.)

The three credit cards – dubbed Ignite, Accelerate and Evolve – are not yet accepting applications. However, you can sign up for a waitlist if you think these cards might be a good fit.

CreditCards.com took a closer look at what sets them apart from other cards designed for students and recent grads, and how they stack up against the competition. Here’s what we found.

See related:  Pros and cons of paying your student loans with a credit card

Sallie Mae Ignite credit card

Designed specifically for college students, the Sallie Mae Ignite credit card offers a flat 1 percent cash back, plus a 25 percent rewards bonus if you pay on time six months in a row. Sallie Mae also hints that you’ll receive additional rewards if you continue to demonstrate “responsible financial behavior,” but it doesn’t say yet what those rewards will be, so it’s too early to tell whether this card will be much more generous than the average student credit card.

The Ignite card also offers a handful of extra perks, including up to $600 worth of cellphone insurance, free access to your FICO score, an instant pause feature for cards that have been temporarily misplaced and the ability to instantly use your card as soon as you’re approved.

In addition, it advertises a 6-month 0 percent promotional APR on purchases and a regular APR ranging from 15.24 percent to 25.24 percent.

How it compares: The Sallie Mae Ignite card sounds an awful lot like the Journey Student Rewards from Capital One card, which also offers a similar bonus to cardholders who pay their bills on time.

The Journey Student Rewards card, for example, offers a 0.25 percent bonus each month you successfully pay your bill on time. Howveer, the Sallie Mae card’s APR is significantly lower than the Journey card’s APR (which is a flat 26.96 percent variable) and its perks appear to be better suited to students who spend most of their time on campus and likely have high-end mobile phones.

Depending on your spending habits, you may be able to earn a bigger return with a cash back card that offers a higher earning rate on select purchases, such as the Discover it® Student Cash Back card, the Discover it® chrome card or the Bank of America Cash Rewards Card for Students. The Bank of America® Travel Rewards credit card also earns a higher flat rate of 1.5 points for every dollar you spend.

But overall, Sallie Mae Ignite appears to be a decent card for students who want a hassle-free rewards card and don’t want to mess with complicated spending bonuses. Its six-month introductory APR is also fairly unusual compared to student cards that begin charging interest right away.

Unlike several of its competitors, though, the Sallie Mae Ignite card doesn’t offer a sign-up bonus, which could be a big deterrent for many students hoping to get a quick cash infusion. Bank of America, for example, offers sign-up bonuses worth up to $200 to $250 on its student rewards cards. Meanwhile, Discover offers to match students’ earnings at the end of the first year.

Sallie Mae Accelerate credit card

One of the more unique credit cards to appear in a while, the brand-new Sallie Mae Accelerate offers new cardholders a strong incentive to put their cash back earnings toward paying down their student loans, rather than depositing it in their checking accounts or using it for extras.

Cardholders will automatically earn a flat 1.25 percent cash back rate on every purchase. But if they use their cash back earnings to pay down their student loans, they’ll earn a 25 percent bonus on their earnings.

Like the Ignite card, the Accelerate card also offers up to $600 in cellphone insurance, free access to your FICO score, an instant pause feature for cards that have been temporarily misplaced and the ability to instantly use your card as soon as you’re approved.

In addition, it advertises a 12-month 0 percent promotional APR on purchases and a regular APR ranging from 15.24 percent to 25.24 percent.

How it compares: Compared to many of the general market cards available to recent grads with good to excellent credit, the Accelerate card doesn’t quite compete – at least not yet.

Cards that offer 1.5 percent cash back on every purchase are pretty easy to find these days, and most advertise much more compelling sign-up offers. The Accelerate currently doesn’t offer a sign-up bonus at all, which will make it tough for the card to stand out from the competition.

The Chase Freedom Unlimited card, for example, is currently offering 3 percent cash back on the first $20,000 that cardholders spend in the first year (after that, it’s 1.5 percent on all purchases).

Meanwhile, the Wells Fargo Cash Wise Visa® Card (which also offers cellphone protection) advertises a $200 sign-up bonus after spending $1,000 in the first 3 months. The American Express Cash Magnet® Card offers a $150 statement credit for cardholders who spend $1,000 in purchases in the first 3 months. Cardholders who repay their purchases in full can even get up to 2 percent cash back if they can qualify for the Citi Double Cash Card, which earns 1 percent when you spend and another 1 percent when you pay your bill.

The Accelerate card’s unique incentive structure may appeal to cardholders who think they could use a helpful nudge to spend their cash back responsibly. Cash back rewards can often feel like free money, making it tempting to use them on indulgent extras you wouldn’t otherwise buy.

But if you’d rather put that money toward your student loans, the Accelerate card may make it more convenient – and psychologically easier – to do so. If you’re really serious about paying down those student loans, though, you’d make more progress picking a cash back card with a higher earning rate.

See related:  First credit card dilemma: Student card vs. secured card

Sallie Mae Evolve credit card

The Sallie Mae Evolve card works similarly to a flat rate credit card, but with a distinctive twist: You’ll get a flat 1.25 percent cash back and then another 25 percent bonus on the two purchase categories that you spend the most on each month. So, for example, if you spend most of your money on gas and restaurants, you’ll get a 25 percent rewards bonus on those earnings.

Like the Ignite and Accelerate cards, the Evolve card also offers up to $600 worth of cellphone insurance, free access to your FICO score, an instant pause feature for cards that have been temporarily misplaced and the ability to instantly use your card as soon as you’re approved.

In addition, it advertises a 12-month 0 percent promotional APR on purchases and a regular APR ranging from 15.24 percent to 25.24 percent.

How it compares: The Evolve card’s rewards structure is interesting since it gives you the flexibility to essentially choose your own bonus category (simply by spending more on certain purchases), rather than be tied to a predetermined category.

However, since it limits the bonus to just 25 percent of the earnings you receive for two rewards categories, the math doesn’t work out in cardholders’ favor – at least not compared to cards that offer 1.5 percent back on every purchase.

For example, if you charged $1,500 one month and spent $600 of that on groceries (your top purchase category) and $300 on gas (your second biggest purchase category), you’d earn $21.57 using the Evolve card. If you charged the same amount to a card that offered a 1.5 percent cash back rate, you’d earn $22.50.

Meanwhile, if you charged the same amount to a card, such as the Bank of America® Cash Rewards credit card, that offers 3 percent cash back on gas (if you pick that as your choice category), 2 percent cash back at grocery stores and 1 percent cash on everything else, you’d still earn more than if you used the Accelerate card. For example, with the Bank of America Cash Rewards card, you’d earn $27 that month (assuming you hadn’t already hit the card’s $2,500 quarterly cap on bonus spending).

See related:  The college student’s guide to earning points, miles and rewards

Bottom line

Sallie Mae’s newest line of credit cards is certainly different from any other cards on the market and may appeal to cardholders who still owe money to the lender’s student loan arm. However, its two cash back cards for recent grads don’t offer nearly as much value as many existing cash back cards, making it tough for them to stand out.

Sallie Mae’s new student card, on the other hand, is more compelling. It’s similar to the Capital One Journey card but is much more affordably priced. Its $600 cellphone protection benefit may also stand out to some students who can’t afford to lose or break their pricey phones.

Meanwhile, its flat rewards rate is a nice perk for students who don’t have the time or inclination to bother with complicated rewards schemes. However, the fact that the Ignite card doesn’t currently offer a sign-up bonus may be disappointing to some potential applicants.

Students with bigger budgets and more time to strategize their spending may also be able to get more value out of student cards, such as the Discover it Student  Cash Back and the Bank of America Cash Rewards card for Students, which offer higher rewards rates on select purchases.

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Published: May 23, 2019

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Credit Card Rate Report Updated: June 12th, 2019
Business
15.61%
Airline
17.54%
Cash Back
17.68%
Reward
17.57%
Student
17.79%

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