The best student credit cards help college students build a positive credit history while allowing them to take advantage of popular credit card benefits like cash back rewards.
For many college students, your first experience with credit will come in the form of a student credit card. These starter credit cards can help you make purchases, cover expenses, earn rewards and boost your credit score — but only if you know how to use credit wisely.
Luckily, we’re here to help. If you have questions about student credit cards, credit-building and how to set yourself up for a strong financial future, consider this a crash course in how to use credit.
In fact, we’ll go ahead and call it Credit Cards 101.
What is a student credit card?
A student credit card is a line of credit specifically designed to meet the needs of today’s college students. The best student credit cards help college students build a positive credit history while allowing them to take advantage of popular credit card benefits like cash back rewards. A few student credit cards even offer rewards for good grades.
That said, the real benefit of a student credit card is the opportunity to establish good credit at a young age. Building good credit is one of the most important things you can do, financially — and the sooner you get started, the better.
Why you should start building credit now
Why do college students need to worry about building credit? Because your three-digit credit score plays a huge role in your financial life. Whether you’re applying for an apartment, signing up for a new phone plan or taking out your first car loan, having good credit will give you a much better experience — which is why it’s a good idea to build good credit as early as possible.
What are some of the benefits of building a positive credit history? People with good credit, which includes any FICO credit score of 670 or above, are more likely to be accepted for credit cards, loans and mortgages. People with higher credit scores tend to be offered lower interest rates, which can save you a lot of money over time. There are even some nonfinancial benefits associated with having good credit — in some cases, for example, your credit history might affect whether or not you get hired for a job.
Minimum age and income for student cards
The Credit Card Act of 2009 effectively banned credit card issuers from issuing cards to people under 21, making it much more difficult for students to access credit cards.
If you are under 21, the only way you can be accepted for a credit card is if you have a co-signer who is willing to take on legal responsibility for any charges made to the card — or if you can prove that you have enough income to pay off your debts. Since very few credit card issuers allow co-signers, you probably won’t be able to get a student credit card of your own until you turn 21.
You can, however, become an authorized user on someone else’s credit card — even if you’re still a minor. You won’t have a line of credit of your own, but you’ll be able to team up with a parent or guardian and use their credit card to make purchases and start building your credit history.
What to do if you don’t qualify for a student credit card
If you’re not eligible for a student credit card, don’t worry — there are still plenty of ways for you to build a positive credit history and access the benefits that a credit card can offer.
Here are some options to consider:
Become an authorized user
One of the best ways to build credit is by teaming up with someone who already has good credit. Many college students can benefit from becoming an authorized user on one of their parents’ credit cards, which allows them to piggyback off their parents’ responsible credit habits and begin building a positive credit history of their own.
As an authorized user, you’ll be able to make purchases on credit. Your parents will be responsible for making on-time payments on the credit cards (although it’s always a good idea to pay them back for any purchases you make), and you’ll be able to watch the shared credit activity become part of your credit history.
Find a co-signer
In some cases, you may be able to access a line of credit by getting a parent or guardian to co-sign a credit card or loan. When a person co-signs a credit card on your behalf, they are essentially promising to serve as backup. If you miss credit card payments or rack up credit card balances you can’t pay off, your co-signer — who is legally liable for any charges made to the card — may be asked to step up and pay off the debts.
Only a few credit card issuers allow co-signing, so keep that in mind as you consider your options.
Apply for a secured card
Some college students who don’t qualify for a standard credit card may be able to improve their qualifications by applying for a secured credit card instead. With a secured credit card, you put down a small security deposit — often around $200 or so — in exchange for access to a small line of credit.
To build your credit history, use your secured credit card to make a few minor purchases every month. Then pay those purchases off, on time and in full, every time your bill is due. If you use your secured credit card responsibly, your credit card issuer will refund your security deposit and graduate you to a standard (or “unsecured”) credit card.
Want to know more? Here’s how to decide whether a secured credit card is right for you.
Add your rent and utility payments to your credit history
There’s one more way for college students to improve their credit history and boost their credit score — and that’s by reporting your rent and utility payments to the credit bureaus. Services like Experian Boost, which allow you to include bill payments on your Experian credit report, are some of the best ways to build credit without a credit card. You might also want to consider signing up for UltraFICO, which incorporates checking account activity and other day-to-day financial transactions into your FICO credit score.
What to avoid with student credit cards
Once you’ve taken out your first student credit card, it’s time to start earning and redeeming your rewards — not just the cash back rewards that come with your everyday purchases, but also the rewards of establishing good credit and using your new credit card responsibly.
This means avoiding late payments, which can seriously damage your credit score. It also means avoiding any purchases that you can’t afford to pay off in full. While some people choose to carry a revolving balance on their credit cards, it’s much better to get into the habit of paying off your statement balance in full every month.
Why? Because 30 percent of your FICO credit score is based on your credit utilization ratio, which is the ratio of your current debts to your available credit. Paying off your balance in full every month is a great way to keep your credit utilization ratio low and your credit score high — plus, if you always pay off your statement balance before your grace period expires, you won’t have to pay interest on your purchases.
If you’re a college student learning how to use credit for the first time, these kinds of smart credit moves can lead to a better credit card before you know it – and, more importantly, a life of good credit and an excellent financial future.