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Student credit cards and young credit

2019 Student Card Survey: More cards, bigger charges

In exchange for richer rewards and student-friendly perks, student card holders are paying more to carry a balance

Summary

Student credit cards are becoming increasingly rewarding, according to a new analysis by CreditCards.com. But in exchange for richer rewards and student-friendly perks, today’s student card holders are also paying substantially more to carry a balance.

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Student credit cards are becoming increasingly rewarding, a new analysis by CreditCards.com found.

Some student cards, for example, are offering plumper sign-up bonuses. Others have retooled their rewards programs, making them friendlier to students’ budgets. In addition, many student cards now come packed with a variety of student-friendly benefits, such as rewards for good grades, automatic credit limit increases, streaming service credits and loyalty bonuses.

Students in the market for a first credit card also have more cards to choose from this year, including a brand-new cash back card from Chase and redesigned rewards cards from Bank of America and Citi.

The student lender Sallie Mae is also getting ready to launch a new set of student cards after discontinuing its cash back card in 2012.

But in exchange for richer rewards and student-friendly perks, today’s student card holders are also paying substantially more to carry a balance.

For the third year in a row, student cards have grown dramatically more expensive, according to CreditCards.com’s latest survey of bank-issued student cards. CreditCards.com evaluated the APRs, penalty charges, promotions, rewards and benefits of 11 student cards that are available nationwide and found that every card that was around last year now advertises a higher APR.

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

2019 student credit cards

Bank of America Cash Rewards Card for Students

APR16.24% to 26.24%
Penalty APRUp to 29.99%
Late payment feeUp to $39
Foreign transaction fee3%
Purchase offer0% for 12 months
Educational contentYes
Free credit scoreYes-FICO
Annual feeNone
RewardsYes: 3% cash back on the category of your choice (including gas, online shopping, dining, travel, drugstores or furniture/home improvement purchases); 2% cash back on groceries and wholesale club purchases; 1% cash back on all other purchases. Note: Bonus purchases are limited to $2,500 per quarter. You may also get a 25% to 75% rewards bonus if you have at least $20,000 saved in a Bank of America account.
Additional perksShopSafe security protection for online purchases, account alerts, mobile app, text banking, travel accident insurance.

BankAmericard for Students

APR15.24% to 25.24%
Penalty APRNone
Late payment feeUp to $39
Foreign transaction fee3%
Purchase offer0% for 15 months
Educational contentYes
Free credit scoreYes: FICO
Annual feeNone
RewardsNo
Additional perksShopSafe security protection for online purchases, account alerts, mobile app, text banking

Bank of America Travel Rewards Card for Students

APR17.24% to 25.24%
Penalty APRUp to 29.99%
Late payment feeUp to $39
Foreign transaction feeNone
Purchase offer0% for 12 months
Educational contentYes
Free credit scoreYes: FICO
Annual feeNone
RewardsYes: Unlimited 1.5 points for every dollar you spend. You’ll also get a 10% points bonus if you have a Bank of America checking or savings account. If you have $20,000 or more saved, you could earn a 25% to 75% points bonus.
Additional perksShopSafe security protection for online purchases, account alerts, mobile app, text banking

Journey® Student Rewards from Capital One

APR26.96%
Penalty APRNone
Late payment feeUp to $39
Foreign transaction feeNone
Purchase offerNone
Educational contentYes
Free credit scoreYes: VantageScore
Annual feeNone
RewardsYes: Up to 1.25% cash back when you pay on time
Additional perksAutomatic credit limit increases when you pay on time, Social Security alerts, free credit monitoring for your TransUnion credit report, credit score simulator tool, account alerts, customizable due date, mobile app, Eno intelligent assistant, ability to temporarily freeze your card, car rental coverage, travel accident insurance, 24-hour travel assistance and extended warranty.

Citi Rewards+ Student Card

APR16.49% to 26.49%
Penalty APRUp to 29.99%
Late payment feeUp to $39
Foreign transaction fee3%
Purchase offer0% for 7 months
Educational contentYes
Free credit scoreNo
Annual feeNone
RewardsYes: 2 points per dollar spent on the first $6,000 you spend at gas stations and supermarkets; 1 point per dollar spent on all other purchases. Unlimited Round Up feature, giving you the ability to earn significantly more points; 10% points back on the first 100,000 points you redeem annually.
Additional perksCiti Entertainment (special access to presale tickets and VIP packages), mobile app, ability to lock your account through the mobile app, payment to payment services through Zelle, account alerts, ability to shop with points at Amazon and BestBuy.com.

Discover it® Student chrome

APR15.24% to 24.24%
Penalty APRNone
Late payment feeUp to $39; $0 first late payment
Foreign transaction feeNone
Purchase offer0% for 6 months
Educational contentYes
Free credit scoreYes: FICO
Annual feeNone
RewardsYes: 2% cash back on restaurant and gas station purchases (up to $1,000 per quarter), 1% cash back on general purchases.
Additional perks$20 statement credit with 3.0 GPA for up to 5 years, Social Security alerts, credit monitoring through Experian, mobile app, ability to freeze account instantly through mobile app or online, account alerts, no late payment fee the first time you pay late, ability to shop with points at Amazon.com.

Discover it® Student Cash Back

APR15.24% to 24.24%
Penalty APRNone
Late payment feeUp to $39; $0 first late payment
Foreign transaction feeNone
Purchase offer0% for 6 months
Educational contentYes
Free credit scoreYes: FICO
Annual feeNone
RewardsYes: 5% cash back in rotating categories on up to $1,500 in quarterly spending (after you activate), 1% cash back on general purchases
Additional perks$20 statement credit with 3.0 GPA for up to 5 years, Social Security alerts, credit monitoring through Experian, mobile app, ability to freeze account instantly through mobile app or online, account alerts, no late payment fee the first time you pay late, ability to shop with points at Amazon.com

Deserve Edu Mastercard for Students

APR20.99%
Penalty APRNone
Late payment feeUp to $25
Foreign transaction feeNone
Purchase offerNone
Educational contentYes
Free credit scoreNo
Annual feeNone
RewardsYes: 1% cash back on purchases
Additional perksA year subscription to Amazon Prime Student, cellphone insurance, car rental insurance, travel assistance, price protection, extended warranty, ID theft protection, upcoming mobile app, $100 discount from T-Mobile, $10 insurance rebate from Lemonade, $100 off furniture rentals from Feather, $45 statement credit from Mint Mobile.

Wells Fargo Cash Back College Visa card

APR13.40% to 23.40%
Penalty APRNone
Late payment feeUp to $37
Foreign transaction fee3%
Purchase offer0% for 6 months
Educational contentYes
Free credit scoreYes: FICO
Annual feeNone
RewardsYes: 1% cash back on purchases
Additional perksAccount alerts, budgeting and tracking tools, car rental insurance, roadside assistance, travel and emergency services, cellphone protection, mobile app

State Farm Student Visa Card

APR17.49% to 25.49%
Penalty APRNone
Late payment feeUp to $38
Foreign transaction fee3%
Purchase offerNone
Educational contentYes
Free credit scoreNo
Annual feeNone
RewardsYes: 1/2 a point for every dollar spent on general purchases, 3 points for every dollar spent on up to $4,000 on insurance payments
Additional perksBonus points for paying for your insurance, mobile app, car rental insurance, Visa student discounts, account alerts

Chase Freedom Student Credit Card

APR17.24%
Penalty APR*Visit your local branch for details
Late payment fee*Visit your local branch for details
Foreign transaction fee3%
Purchase offer*Visit your local branch for details
Educational contentYes
Free credit scoreYes: VantageScore
Annual feeNone
RewardsYes: 1% cash back on purchases
Additional perks$20 bonus every year your account remains in good standing (for up to five years), a chance for a credit limit increase after five months of on-time payments within the first 10 months of opening your account, purchase protection, extended warranty, account alerts, the ability to lock and unlock your account, contactless technology, ability to shop with points through Amazon, mobile app

Student cards more generous – but also more expensive

Some student cards have hiked students’ rates by as much as 1 to 2 percentage points or more, helping push the average minimum APR for all 11 cards to 17.46 percent – up from a high of 16.48 percent in 2018. In 2014, the average student card APR was just 13.27 percent. One student card even hiked its lowest available APR by more than four and a half percentage points.

Late fees have also ticked up since the last time CreditCards.com surveyed student cards. For example, among the 11 student cards surveyed, at least seven charge late fees up to $39. Meanwhile, only two cards waive students’ first late payment.

According to Beverly Harzog, a credit card expert at U.S. News and World Report, many students are likely paying even higher interest rates since their experience with credit is so limited.

Most student credit cards advertise a wide range of possible APRs, including maximum rates that run as high as 25 percent or more. As a result, the average maximum card APR for student credit cards is currently 24.18 percent, while the average median card APR is 20.82 percent.

If you’re a student with minimal credit experience, “more than likely, you’re going to fall into the top of the range,” said Harzog.

More students are carrying a balance

Like most credit cards, student cards typically offer a grace period and so students can avoid paying interest if they pay off their charges in full each month.

“Don’t ever carry a balance, and then it won’t matter what the APR is,” said Harzog.

However, a growing number of student cardholders are paying interest instead, a recent survey by the educational technology company EverFi found. For example, just 51 percent of the students surveyed said they planned to pay off their balances in full – down from 79 percent in 2012.

Students are also paying more late fees, the survey found. For example, 22 percent of students admitted to falling behind on at least one payment – down from 9 percent six years ago.

Students who fall behind on payments may not have to worry about higher rates, though. Most student credit cards don’t charge a penalty APR, which is somewhat unusual for a credit card. Among the 11 student cards surveyed, only three are known to charge a penalty rate.

A handful of cards also offer promotional APRs, giving students a chance to briefly carry a balance without incurring interest. However, the offers are typically short-lived. For example, of the seven cards that offer a 0 percent APR, four cap the promotion at six to seven months.

See related:  When, why, how should you graduate from a student credit card to a regular card?

More generous rewards

Although student cards are more expensive nowadays, they are also more generous, our survey found.

For example, two of Bank of America’s student cards offer sign-up bonuses worth $50 more than the bonuses they offered in 2018.

Most student card bonuses continue to be more modest, though, than the bonuses that more experienced cardholders receive. Among the 11 student cards surveyed, for example:

  • Just two student cards offer bonuses worth $200 or more.
  • Two cards offer an unlimited match of cardholders’ rewards earnings.
  • Two cards offer sign-up bonuses worth $25.
  • One card offers a $50 sign-up bonus.
  • Another card offers a bonus worth up to $75.

Bank of America and Citi also retailored some of their cards’ rewards programs this year, making them more flexible for a variety of budgets and, ultimately, more student-friendly.

Bank of America, for example, has begun letting cash back credit card holders choose the rewards categories that earn 3 percent cash back. Among the card’s options are student-friendly categories such as online shopping, dining and gas.

Meanwhile, Citi has introduced a new “Round Up” points program on the Citi Rewards+ Student credit card that heavily favors cardholders who make small-dollar purchases.

Cash back continues to be the most common rewards option

Rewards continue to be a widespread benefit on student cards. For example, 10 of the 11 student cards surveyed offer some kind of a rewards program. Seven are cash back cards and three are points rewards cards.

However, the amount of rewards that students can earn varies widely, depending on the card. Some student card rewards programs are all but indistinguishable from the cards that are offered to more experienced credit card holders. For example, Bank of America, Discover and Citi offer the same rewards on their student cards as they offer to general cardholders.

Other rewards programs are more modest. For example:

  • Three student credit cards offer just 1 percent cash back on every purchase.
  • One student card offers up to 1.25 percent cash back.
  • Another card offers just half a percentage point per dollar spent on nearly every purchase.

Students’ credit limits also tend to be smaller than the credit limits offered to other cardholders. However, students can still earn quite a bit – even with their smaller limits.

Heather McInelly, a parent in Arizona, says her son recently applied for a Discover student card, hoping to earn some extra cash.

“Within moments of applying, he was approved for an initial credit limit of $1,000,” said McInelly. Since then, he’s qualified for a substantial credit limit increase and earned $50 in cash back.’

Student-friendly perks

In addition to rewards, most student cards continue to offer a range of student-friendly benefits, such as modern mobile apps and the ability to freeze a misplaced card. A few cards even offer mobile phone protection to students with expensive phones. In addition, five student cards waive foreign transaction fees – an appealing perk to students who study abroad.

Some student cards also offer special perks just for college students. Discover, for example, offers a $20 Good Grade Reward when students earn at least a 3.0 GPA. According to Discover’s Laks Vasudevan, the bonus is intended to help motivate students to continue to be responsible.

“We decided, for students, we would love to reward them a little more, to acknowledge their life stage at that time,” said Vasudevan.

Meanwhile, Deserve offers a one-time credit for Amazon Prime Student, which otherwise costs $59 a year. Chase’s new student card also offers a special monetary bonus: Students who continue to hold onto their cards will get a $20 annual loyalty bonus for up to five years.

In addition, a number of student cards offer incentives for students to take care of their credit. For example, Capital One offers an extra 0.25 percent in cash back to students who pay their bills on time. Similarly, the upcoming Sallie Mae Ignite credit card will award a 25 percent rewards bonus to students who make six on-time payments in a row.

Both Capital One and Chase also promise to review students’ credit limits after five months of on-time payments.

Credit education and security

Most student credit cards also appear to place a high priority on credit education and security, which may also appeal to parents concerned about their children’s safety. Among the 11 student cards surveyed:

  • Eight offer a free credit score. Six offer access to a FICO score and two offer access to a VantageScore.
  • Three cards offer free Social Security alerts and basic credit monitoring.
  • Five cards allow students to instantly lock and unlock their accounts when they misplace a card.
  • All of the student card issuers surveyed offer some kind of educational content.

In addition, some of the student cards included in the survey offer other insurance benefits, such as car rental insurance and extended warranty.

Students have more options this year than they did in 2018

Until this year, students’ options for a new credit card were dwindling. A number of lenders have pared back their student card offerings in recent years or stopped offering student cards altogether. Chase, for example, hasn’t offered a student credit card since 2011. As a result, the number of student cards open to new applicants dropped from at least 16 cards in 2014 to just 10 in 2018.

However, that trend appears to be reversing as more lenders, such as Sallie Mae and Chase, reenter the student card market. Once Sallie Mae begins offering the Ignite credit card, students will be able to choose from at least 12 student credit cards from a major lender.

According to financial publisher Chane Steiner, students are seeing more student cards become available, in part, because lenders are trying to win over young borrowers “before it’s too late.”

“Traditional lenders are beginning to feel competition from the latest banking and financial service apps and online options,” said Steiner, who is CEO of the personal finance website, Crediful.

As a result, they are feeling pressure to jump-start financial relationships with borrowers while they’re still young – especially since today’s students are more tech-savvy than previous generations and so may be more inclined to embrace a nontraditional lender.

“By offering a student credit card, the lender is potentially creating a customer for life,” said Steiner. “That’s the real reason for offering credit to a demographic that would otherwise be considered risky.”

See related:  The soon-to-be grad’s guide to employer credit checks

Tips for choosing a card

If you or your child is considering a student card, make sure you look at the terms and conditions, not just the rewards, say experts.

“Read the fine print very carefully,” says Harzog.

Avoid cards that charge annual fees and make sure there is a substantial grace period.

In addition, consider other perks that can help students maintain their scores, such as free monitoring tools, says Steiner.

“That way, you can see credit changes as they are happening and intervene in time.”

Finally, if you’re a parent, talk with students about credit and about how their cards can help them save money in the future by building a stronger credit history.

“In the U.S., credit is so important,” says Mike Scott, a mortgage lender in Texas who helped his sons get secured cards. “If somebody doesn’t have good credit, it can haunt them. If they do have good credit established, that can help them achieve their goals.”

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Published: August 5, 2019

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Credit Card Rate Report Updated: December 4th, 2019
Business
15.09%
Airline
16.88%
Cash Back
17.38%
Reward
17.04%
Student
18.58%

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