Credit cards have gotten harder for college students to get, but debit cards and mobile payment methods fill in the payment gaps.
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In January 2019, Sallie Mae found that mobile payments had surpassed debit cards to become the most prevalent payment method used by college students.
- In fact, 86 percent of college students used mobile payment methods in 2019, up from 77 percent in 2016.
- In comparison, 85 percent used debit cards – the same percentage as in 2016 – and 57 percent used credit cards, up one percentage point from 56 percent in 2016.
- Most students – 81 percent – used cash, while 12 percent said they used ATM cards and 12 percent said they used personal checks.1
Perhaps the reason students are more likely to carry debit cards than credit cards is because they have more access to those cards. The CARD Act requires anyone under 21 who wants their own credit card to have an adult co-signer or show they have enough income to repay credit card debt.
Of students who had debit cards in 2019, 94 percent had cards linked to their checking or savings account. Six percent carried a prepaid debit card and 11 percent had both.1
Among students who use mobile payment methods:
- PayPal was the most popular in early 2019, with 62 percent of students using it.
- That was followed by 37 percent who used Venmo, 22 percent who used Apple Pay, 18 percent who used Google Pay, 9 percent who used Samsung Pay, 7 percent who used Square Cash and 4 percent who used Bitcoin or another cryptocurrency.1
For student purchases of $20 or less, 49 percent of students used cash, followed by 47 percent who used debit, 26 percent who used a mobile payment method and 21 percent who used credit.
For purchases greater than $20, a majority of college students – 56 percent – turned to debit cards, followed by 32 percent who used credit, 23 percent who used cash and 21 percent who used mobile payments.1
Debit cards were also the most common type of payment method used when shopping online, chosen by 51 percent of student respondents.
Mobile payments were the second most popular method used online with 38 percent of students paying for online purchases that way, followed by 31 percent who used credit and 6 percent who used cash.1
The continuing case for credit
While the CARD Act made it more difficult for college students to access credit, it in no way has eliminated the college market, especially among students concerned with building credit.
- When asked why they got a credit card, 58 percent of respondents from the Sallie Mae Majoring in Money survey said they did so to begin building their credit history.
- That was followed by 30 percent who said they got a credit card because parents or guardians suggested they do so.
- Twenty-nine percent said they needed an easy way to buy items online, 28 percent said they needed an alternative to cash and 25 percent said they were interested in earning rewards.1
But college students with credit cards often had to jump through hoops to get them. Among students in 2019, 28 percent said they had secured credit cards, meaning they required a security deposit equal to the credit line.
In 2019, college students reported having on average five credit cards, up from an average of three cards in 2016.1
When it comes to credit card balances, college students in 2019 reported an average balance for the most recent month of $1,423. That was higher than the average balance in 2016, which was $1,076.1
In 2017, students at two-year colleges were more likely to have at least one credit card than students at four-year colleges, according to an Ohio State University study. In fact, 66.1 percent of students at two-year public colleges had a credit card compared to 55.7 percent at four-year public institutions and 55.2 percent at four-year private institutions.2
See related: 4 reasons why college students need a credit card
Choosing a credit card
According to Sallie Mae, the top reason (35 percent) college students in 2019 chose one particular credit card over another was because their parent or guardian either used that card or recommended it. The second most common reason was because the card offered the easiest approval, with 34 percent giving that reason.1
Other reasons given for choosing a particular card were cash back (32 percent), the card was connected to their checking account (29 percent) and they received rewards points (28 percent).1
- When asked why they had multiple credit cards, the largest percentage of students – 46 percent – said they thought it would help them improve their credit score.
- That was followed by 40 percent who said they wanted to earn rewards or different rewards and 34 percent who said they had different cards for various purposes. For example, they might use one for everyday spending and a different one for emergencies.
- Twenty-nine percent said they had multiple cards in order to increase their total credit limit.1
Students were also particular about the types of rewards they wanted, with many showing an interest in how their rewards could help them pay down other debts.
In fact, 59 percent of students in 2019 said they wanted rewards that could be redeemed through the automatic payment on a loan such as a student loan or car loan.1
See related: How to get a credit card as a college student
Student cards get more expensive
For some college students, a student card is their first experience with credit. Student cards are unsecured credit cards that typically have an initial lower credit limit because they are targeted toward those who have little credit history. Ideally, students can use them responsibly to make purchases, pay the balance and build credit.
While many offer benefits catered toward students such as rewards for good grades, a CreditCards.com analysis in 2019 found the APRs of student cards are rising.
The average minimum APR for 11 student credit cards surveyed by CreditCards.com was 17.46 percent in 2019, up from 16.48 percent in 2018. The trend is even more exaggerated when you consider that in 2014, the average APR for a student credit card was 13.27 percent.3
However, the good news is that the rewards on student cards are also improving. Cash back was the most common reward offered by student cards in 2019, according to the CreditCards.com analysis, with seven out of the 11 cards surveyed touting it as a reward.3
How students use credit cards
Students in January 2019 were most likely to use their credit cards for online purchases, with 50 percent saying they do so compared to only 12 percent in 2016. Also, 31 percent of students said they used their credit cards at stores where they have a merchant card, up from 3 percent in 2016.
Another 23 percent said they used their credit cards to buy big-ticket items, up from 16 percent in 2016.1
Some college students use credit cards to help fund their education costs, according to a separate study by Sallie Mae. In 2019, most students used federal and private student loans to cover education costs, but 7 percent used credit cards to help finance their education, down from 9 percent in 2018.
The average amount in college costs paid on student credit cards was $1,405 in 2019, down from $1,564 in 2018.4
Concerns about money management and credit cards
While more than half of college students in 2019 used credit cards, many don’t feel comfortable with their money management skills.
- Only slightly more than half – 53 percent – believed they were prepared to manage money, according to a study by EVERFI and AIG Retirement Services.
- Only 35 percent of college students said they had taken a personal finance class in high school, and even among that group, only 55 percent felt they were prepared to manage money.5
When it comes to credit cards, some students worry about the possibility of overspending. Approximately 23 percent in 2019 either somewhat agree or strongly agree that their credit card debts are out of control. On top of that, 22 percent either somewhat agree or strongly agree that they will have some credit card debt for the rest of their lives.1
However, not all college students consider credit card debt to be a big deal. Approximately 42 percent agree to some extent that they have less anxiety about credit card debt than other types of loans.1
Many college students have reported using money and credit responsibly. In 2019:
- 72 percent said they paid their bills on time.1
- 55 percent said they track their spending.1
- 28 percent said they pay off high interest debts first.1
But not all college students used credit cards responsibly. The percentage of students who never paid a credit card bill late actually decreased from 91 percent in 2012 to 78 percent in 2019.5
Only 60 percent in 2019 reported paying their credit card bills in full each month. Among the 40 percent who carried a balance, 26 percent said they pay more than the minimum and 11 percent make minimum payments. Only 1 percent reported paying less than the minimum and 2 percent said they weren’t sure how much of their balance they paid.1
Among those who carried a balance, the average balance for the previous month was $1,423 while the average balance for the past 12 months was $1,183.1
See related: Guide to responsible credit card use in college
Students and credit
Many students are optimistic about their ability to qualify for credit.
Forty-nine percent of college students believed they could qualify for a credit limit of $1,000 or greater in 2019. Seventeen percent of college students said they didn’t know how much credit they would qualify for; 5 percent said they would not qualify for a credit card.1
While many students apply for credit to build their credit history, some are unaware of their credit scores.
In 2019, 24 percent of students said they didn’t know their FICO score while 19 percent said they didn’t have one. Of the students who did have a FICO score, 27 percent reported that it was between 651-750; 14 percent said it was above 750, and 14 percent said it was below 651.1
Many students were also unfamiliar with their credit reports in 2019. Only 46 percent of college students had viewed their credit reports in 2019 and 19 percent had never viewed their credit report. Seventeen percent of college students didn’t know whether they had a credit report.1
With technology so accessible, mobile payments have become a prevalent way for college students to pay, but between debit cards and credit cards, plastic seems destined to continue to dominate the college payment landscape for years to come.