What Students Need to Know About Credit Cards
Updated: January 15, 2018
CreditCards.com's Top Student Credit Cards - January 2018
- Discover it chrome for Students - best at restaurants and gas stations
- Discover it for Students - best for online shopping at Amazon.com
- Deserve® Edu Mastercard for Students - Deserve will pay for Amazon Prime Student
- Journey Student Rewards from Capital One - no foreign transaction fee
- Citi ThankYou Preferred Card for College Students - best sign up bonus
Student credit cards are tailored to the beginning consumer, giving you the opportunity to sign up when you don’t have the most robust credit file or when you have a thin file. There are also cards that offer no annual fee and even cashback rewards.
Here, we look at:
- How can college students build credit?
- How to use your credit cards as a student
- How credit cards work
- Why college students should have a credit card
- How to get your first credit card
Learn more about building your credit as a college student:
How can college students build credit?
- Check your credit reports. There are 3 major credit bureaus – TransUnion, Equifax and Experian. Check them to make sure they have started a file on you. Also check for accuracy. You can pull your TransUnion report for free at creditcards.com each month, or you can check all three for free once a year at AnnualCreditReport.com.
- Check your credit score. A score is created from each credit bureau’s report by FICO and VantageScore. You can check your VantageScore for free at CreditCards.com or all three FICO scores for about $20 each at MYFICO.com. Ideally, you want a score of at least 670 out of a scale of 300-850, with 850 as the best.
- Look at credit cards. The easiest and fastest way to build credit is with a credit card. Just make sure you apply for one you are likely to get – that’s why you need your credit score.
- What to do if you are under 21. If you are under 21, then your options are limited, but there are a couple of ways to do this. If you have your own income, you can get your own card. Your best bet is a card that allows for thin credit or a secured card, which requires a refundable deposit. If you don’t have income, you can be an authorized user on a more experienced consumer’s card or even open an account with a cosigner/joint cardholder who is at least 21 years old. Either way, make sure your credit habits will be sent to the credit bureaus.
- Pay on time and in full. These 2 things are among the most important habits you can have when building credit. Also, put a small charge on the card each month to keep the account active.
How to use your credit cards as a student
- Pay on time. This is the most important part of your credit score. One missed payment can drop your score into the next tier, and it can take months to recoup. But pay on time and your score will climb in months.
- Pay in full. Instead of using your card as a loan, use it to build credit. That will keep you from incurring prohibitive interest charges.
- Put a small charge on the card. This keeps the account active month to month, and allows you to build a history, one of the factors in your score.
- Ready for rewards? If you are doing Nos. 1-3 on a regular basis, you may be ready for using rewards. The trick is to put as much on your card as possible while paying in full each month. This allows you to maximize earning cash back or points. Watch out for convenience fees, though – for example, some colleges charge a percentage for using a credit card to pay for tuition.
How credit cards work
- What credit cards are for. Credit cards are for convenience and building credit. In fact, proper use of a credit card is the fastest and easiest way to build credit.
- What credit cards are not for. Don’t use a credit card as a long-term loan. The interest rates can be prohibitive.
- How to get a card. First off, make sure you know what your credit score is, because you don’t want to apply for cards you likely won’t land. Look at annual fees, rewards, foreign transaction fees and benefits before choosing a card.
- Why on-time payments are important. The most important aspect of your score is whether you pay on time. One late payment can drop your score, and it can take months to get it back to where it was.
- Why you want to pay in full. When you carry a balance on your card, you are paying high interest rates on the balance, which are accrued daily. This means you can end up paying thousands of dollars in interest fees, depending on the balance. By paying in full each month, you can avoid the interest.
- How to use the card. Whatever you do, don’t put it in a sock drawer and forget about it. If you don’t plan to use it on a daily basis, put a small charge on it each month (and pay in full before the due date). That way, you keep the account active, which helps your credit.
Why college students should have a credit card
A credit card is the easiest and fastest way to build your credit. It has to do with how the scoring models are set up. But college students can be limited in how they access a card. If you have an income, you can get your own card. If not, look at becoming an authorized user on an experienced consumer’s account. Either way, make sure the card’s paying habits are sent to the 3 major credit bureaus.
How to get your first credit card
- Check your credit reports. Reach out to the credit bureaus if your credit file is incomplete or inaccurate.
- Check your credit scores. This will help you decide which card to apply for.
- Research available cards. Look at fees, including annual fees, as well as rewards opportunities.
- Apply for one card at a time. Multiple “hard pulls” (checks that are reflected on your score) on your credit reports can appear to lenders as though you are desperate for cash. Only apply for a card if you are reasonably sure you can get it.
- Tell the truth. You will be asked to provide personal information and your income. Don’t lie, because if you are caught, you can lose the account.
- Pay on time and in full each month. These are the two most important aspects of your score.
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