A student credit card is a starter card for college or university going students that may be used to pay for textbooks or unexpected costs while also establishing credit. Unlike most other credit cards, student cards offer lower income and credit history restrictions. They can also provide perks designed exclusively for students, such as bonuses for maintaining outstanding grades. Furthermore, many student cards include purchasing incentives such as cashback or trip benefits. Some may even have a little sign-up incentive.
Unlike a standard credit card, a student credit card may usually be obtained with no credit history. Student cards are generally people’s first credit cards, which card issuers are aware of. To be granted any form of credit card, even a student card, a person must have a source of income. The source of income might come from earnings from a job or the funds obtained by the student from grants and scholarships.
Unsecured credit cards include student cards. This implies that an individual will not need to put down any money to get a student credit card. On the other hand, a secured credit card will require a deposit to be submitted at the time of opening the account. This is done to ascertain their credit line. Although a person can develop credit with a secured card, student cards are still a better option with less requirements.
Although student cards come with restricted non-purchase transactions that include cash advance or transferring of balance, it is still a better option for the students. This is because it will keep the students out of any unwanted trouble before they even learn how to use a credit card. Therefore, a student credit can be considered a learning tool, means of payment, and building their credit score.
This article will discuss the way a student card works, along with different factors that can be used to compare different student cards. The article will provide some tips on how to use the card effectively. Moreover, the article will highlight the best student cards in the market for each specific category. The article will also include a FAQs section comprising the students’ questions.
What is a Student Credit Card Used For? How does a Student Credit Operate?
An individual may use a student credit card to borrow money on credit to carry out a transaction on a different product and then pay it back later. The issued card will also have a certain credit limit that must be maintained. Hence for each card given its credit limit, there is a maximum amount of money a person may borrow from the bank at any given moment.
For example, if a college-going student has a student card with a $1000 credit limit. This implies that students can only make purchases up to that amount. So if he purchases books for $400, then they still have $600 of available credit.
Once the student has borrowed credit by using a company’s credit card, the card issuer will send them their monthly statement when the billing cycle for that month has ended. This will display all of their transactions and purchases from the previous statement cycle, as well as their final balance. The billing statement will also indicate the minimum payment necessary to be paid and the due date of their bill.
The minimum needed payment is an individual’s pay to avoid late penalties from their credit card issuer. It is usually a small proportion of their balance that is somewhere between 2% to 3%, or in some cases, it is a flat cost normally within the range of $25 to $35, whichever is greater. The account of the account holder will stay in good standing as long as they make at least the minimum payment.
The person would still need to pay the interest payment on their transactions in the case they only make minimum payments. Interest costs are calculated using the credit card’s annual percentage rate (APR), which the cardholder may find in the terms and conditions of their card. The terms and agreements are given to every credit card issuer or anyone who opens a bank account.
Hence it is imperative to pay the whole bill balance before the due date to prevent being charged interest rates.
What Factors Should Be Considered To Differentiate Various Student Cards?
There are several student cards in the market, each one having different yet some very similar features and incentives. For a student who is looking to open an account to get access to student credit, it is essential to consider the following factors before making any decision. The factors include:
Zero annual fees
There are some card companies that ask for a yearly fee to keep the account active. Although this annual charge might be worthwhile in the case of some cards, for a student with a limited source of income and credit line, it is wise to go with those cards that have no cost linked to them.
The benefits of choosing a no-cost credit card include saving money right now, which will turn out to be beneficial in the long run. Moreover, the cardholder can keep that no fee cost forever; even if they move to a better rewards card, they will still have a backup card for emergencies.
Notification to the credit bureaus regarding the account activity
It is imperative that the credit card activities of the student cards must be reported to the three main credit bureaus on a monthly basis—the students ‘need to ensure this in order to establish credit. So the card issuers must report the monthly payment transactions to the credit agencies to keep track of the students’ credit scores. This should be carried out automatically on most student cards.
Reasonable grace period
Students need to seek those card companies that offer an excellent grace time. In general, most student credit cards have at least a 21 days grace period after concluding their statement period. It is important that the student read out the terms and agreement of the card they are purchasing. This is carried out to know whether a card has a grace period involving zero interest or is there some interest linked to it.
Tracking the person’s credit score
It is quite simpler to build a credit line when people can easily monitor their progress on a monthly basis. To make things convenient for the students, most card companies will include free credit score tracking on a regular basis. This attracts individuals who are seeking incentives when choosing a student card.
Rewards included in the card
A decent rewards card can help students save money on transactions. The best student credit cards will reward people with points or cashback on regular transactions like food and petrol. Typically, rewards can be exchanged for bill credit or a gift card. So these rewards can be used to pay credit card debt or even utility bills.
APR offered by the card issuer
There are several credit cards that have a zero per cent APR attached to it. This means that college students will not pay any interest payment when the account is opened in the first six months. If you rely on quarterly grants or biannual scholarships for your student money, an APR deal that allows you to postpone paying interest for a few months might be beneficial.
Hence, to avoid incurring late penalties, it is wise to pay the minimum payment for the card each month.
Fees linked to foreign transactions and payments
In this case, the student wishes to study in a foreign country, and then it would be in their best interest to go with a card that does not charge a fee on foreign transactions. Several cards out there might demand a cost to be paid on purchases made in a foreign currency. And that cost would come under foreign transaction fees. As a result, this may add up to the everyday expenses over the course of a semester in a foreign country.
There are several other key features that students should also consider, such as around the clock customer service and bonuses for good grades and results. Moreover, due to the innovation in technology, it is important to select a card issuer with a user-friendly mobile banking application. The app can help students make payments, check their balance, etc.
How to Use the Student Credit Card in an Effective Way?
Having a student credit card is all about starting to establish credit and improving the credit score. As a result, it is important to use the card in the most efficient and effective way that corresponds to no slackness from the users’ end. The following steps should be considered to get the most out of the student card:
Payment should be made in a timely manner whenever it is due
The most important aspect of the credit card is that the bills are paid in a timely manner each month. The student’s payment history accounts for a significant proportion of their credit score. It accounts for no less than 30% on the FICO score model.
A student should pay off their credit card bill in full each month to prevent interest. To keep the account in good condition, the least a student can do is make their minimum payment before the due date. Making late payments is the quickest way to ruin your credit.
Keep track of the transactions made
The disadvantage of having a credit card is that if a person is not too careful with their spending habits, they might spend more than they can afford to pay back in a timely manner incurring no interest payments. Therefore it is wise to consider the credit card as a debit card, and the payments should be made and paid off timely.
Those transactions should move forwards that a person knows they can pay back immediately. The mobile app for the card issuer is a great way to keep a record of the transaction a person has made and the due date they should be paid back in full. The mobile app can be accessed at any place where the internet is available.
Keep a check on your credit
In order to know the condition of your credit line, a person should always maintain track of their credit score growth. Not only is this a simpler but also a healthy habit to develop for the long run.
Although the majority of the card issuers provide at least once a month free credit score check, so this opportunity should be availed to have know-how about your credit conditions. Moreover, people should check their credit scores on an annual basis as well. In addition to this, each credit bureau offers a free credit report once a year.
Be realistic about the student card
Years of gradual growth are required to establish excellent credit. It is considered a wise decision to keep the expectations low since the credit is not developed overnight. Also, it is imperative that students do not apply for many cards in the hopes to exploit the system. That is why a student should not use more than two student cards while studying. Following these footsteps will result in you getting good credit after the school years.
After graduation, the credit that a student has developed over the years will aid them in acquiring a better rewards credit card. But it is in the interest of the students if they do not cancel their student card as that can come in handy in unfortunate instances. The longer the credit card age, the better it is in terms of developing a credit history.
This is because the duration of the credit history influences the credit score, and having a higher credit history is advantageous in terms of score rise.
What are the Best Student Credit Cards for University Students?
Having a decent credit score is crucial when making major life decisions after completing your studies, such as renting an apartment or applying for a vehicle loan. Opening a credit card for college students is a smart approach to start establishing credit while also benefiting from incentives and unique financing options.
There are various college student cards available, each offering distinct features for all sorts of students that include travellers, foodies, people who are commuting, and foreign students. Some cards have permissive credit history criteria that allow students to be granted a student card even if they had poor credit line.
In this section, we will take a look at various student cards that are considered the best in the category they fall in. They include the following:
Chase Freedom Student Credit Card
The Chase Freedom student card is reviewed as the best in terms of flexible rewards. The card offers a variety of features that include no annual fee charged by the company. The reason is that the company believes that it is a credit card for college students.
Using this card is an excellent way to begin earning travel points. That’s because the card gets 1% cashback on all transactions and 5% cashback on all qualified Lyft rides. However, the cashback is in the form of Chase Ultimate Rewards points. Students that have this card can enjoy the perks to redeem the points for cash back at a specific rate set by the company. The rate is fixed at one cent per point on their own.
The cardholders may also get a $50 bonus on the first purchase they made, provided that it is done in the first three months after the account has been opened. If the cardholders maintain the card’s standing in good condition, they will receive a $20 bonus as well for each account anniversary year in the first five years the card is held.
Users may be eligible for a credit limit increase in the case they make five on-time monthly payments in the first ten months of the account opening. Since the student card comes with a limited credit line, having an increase in the credit would be advantageous. But users need to pay back the monthly credit amount in full and in due time.
However, there are a few drawbacks to keeping this card. For example, the card does not provide an introductory interest rate on the transactions made; foreign transactions are prone to a 3% fee.
Capital One Quicksilver Rewards
Students’ Capital One, Quicksilver Rewards card, is labelled as the best card in the case of everyday transactions and purchases. This card is perfect for those that are seeking simplicity in a card with cashback incentives. If students apply for the card, they will get an infinite 1.5% cashback on all kinds of transactions they make. The card also comes with no yearly fee.
The card has a unique feature that allows the users to pay for transactions they incurred through a virtual card number that is specific to each person. This extra layer of protection will protect the credit card even further. The drawback of choosing this card is that there are no sign-up incentives.
The benefit of selecting this card is that since there are no international transaction fees, this is an excellent card to carry with you when going overseas.
Capital One SavorOne Rewards
Capital One also offers another type of credit card for the students under the name Capital One SavorOne Rewards. This card is particularly for students who are a tad bit strategic when it comes to bonuses.
The strategic factor makes this card a little complicated as well. For instance, a user of this card would earn 3% cashback in several categories, including a restaurant, entertainment, streaming services like Netflix, etc. The 3% cashback is can also be used in grocery stores except for the mainstream superstores like Walmart. Apart from these categories, there is 1% cashback on all other things.
The company also offers some limited-time discounts and offers. These days, the ongoing offer is 8% cashback on the tickets that a user would purchase from Vivid Seats. So a user who has a passion for sports and sporting events might benefit a lot from this offer. Similar offers do come up as well.
Although the card does not offer any sign-up bonus, it also does not charge foreign transactions. It even offers a virtual card number to its users to pay their bills with convenience.
Bank of America Cash Rewards Credit Card
The cash rewards credit card by the Bank of America is considered the best card when it comes to flexible bonus categories. The card allows college going students to generate a lot of extra money by earning 3% cashback in just one of the following categories of their own choice. This includes gas, internet shopping, restaurants, and pharmacies, along with home furniture.
Moreover, based on the purchasing patterns, a user of this card can modify their category on a month-wise basis. This feature is not easily available even on standard cards; thus, if a person can optimize their cash back depending on their transactions, this is a huge benefit for them.
A cardholder can even get 2% cashback on certain categories that consist of groceries and wholesale clubs. Along with this, they can earn 1% cashback on everything else.
The bonus category transaction has a limitation attached to it, set at $2500 every quarter. This limitation is an accumulation of the 2% and 3% cashback that the company was offering with this card. If the limit has been reached, the user will get 1% cashback on all other things for the remainder of the quarter.
Some additional perks related to this card includes a $200 bonus given that the users spent $1000 in transactions in the first 90 days of account activation. Furthermore, the card is linked with no annual charge, which is in favour of the students.
Some drawbacks linked with this card consist of a 3% foreign transaction fee that is compulsory to be paid by the student if such a fee is paid for an overseas transaction.
Bank of America Travel Rewards Credit Card
The travels reward credit card by the Bank of America is known best for the simplicity it brings for its users. Simplicity means the people do not have to concern themselves with bonus categories and are completely okay with opting for the simpler approach.
Users will earn a set of 1.5 points on every dollar of the transaction they make using the card. The type of transaction does not matter as long as the purchase is made. The incentive provides greater than 1% cashback as opposed to other cards.
The cardholders will get points on their purchases relative to other cards that offer a cashback scheme. Although these points can be redeemed, some value will be lost as the points will be used when the user will travel and have points to spare.
To redeem points on this card is quite convenient, and the process is simple. The points can be used to reimburse the cost of those transactions that follow under the category of travel. This may include airfare, accommodation, all kinds of transportation. Entertainment transactions like entry fees to amusements parks or museums can also be redeemed through the point system.
The perks of using this card will include that it has no annual fee linked to it; new users of the card will also receive a 25000 point bonus after account activation. These points can be redeemed against $250 in the category of travel expenditure. To qualify for this bonus, the users would need to spend about $1000 in the first 90 days.
Deserve EDU Mastercard
The Deserve EDU Master card is labelled as the best card for international students that are either studying or looking to study abroad. The card does not have strict requirements, such as it does not ask for the student’s social security number to open the account. So international students can surely apply for it.
The card comes with 1% cash back on all its purchases, along with no charge on the annual fee. The card also covers mobile phone protection costs, which is considered a plus benefit for the users. This is because the users are mostly college-going students that are prone to lose their cell phones. Having a card covering the cost is an incentive for them.
But to avail of the protection cost, users have to pay their monthly mobile phone bills using the card. As a result, they will get a coverage protection fee of a whopping $600. However, the company will deduct $50 every time an incident happens that involves the mobile phone. The coverage cost extends to $1000 per year, which the bank will pay if the requirements are met.
The card also comes with vehicle rental insurance and has no foreign transaction fee linked to it. After a student has spent about $500 in the first three months of account activation, the new card user will be given 12 months of Amazon Prime Student account payable by the bank.
The card also comes with a referral program. This means that if a student is able to convince their friend to open an account at the bank, they will get a $30 bonus on every referral provided that their information is mentioned at the time of account opening. There are no limits on how many people a student can refer to, so a student can earn some bonuses if they have a large number of acquaintances on social media.
Frequently Asked Questions
Can a student apply for a student credit card even if they have no credit?
Credit history is not required when applying for a student card. The student card is designed to help students build their credit lines. Paying the bills on time every month is the first step to improving the credit score. Having a higher credit will open more opportunities for better rewards cards.
How to locate the best student card?
The best student card varies from one person to another. It is important to weigh all the options to find the best card that is suitable in your case. Those student cards should be preferred that have no annual cost, zero foreign transaction fee and have a better rewards program.
Is there any age requirement for a student credit card?
Although most banks ask the student to apply for the card when they reach the legal age of 18 years old, in the case they are younger than this age and still wish to apply for the student card, then they need to present some proof of funds. The student’s parents or guardians can co-sign on behalf of the student giving legitimate grounds to have a student card.
To determine the best student card in the market, it is important to consider certain factors. These factors would include the credit limit requirement, rewards program offered by the bank, APR and introductory rates attached to the card, bonus and foreign transaction fees along with the annual fee for the credit card.
Students that would wish to develop their credit line and have robust financial skills; should practice paying bills on time. This means that they should owe the due amount before or on the due date to keep a good record in their credit history. Students should also learn to spend in a healthy way. This would mean that they should not overspend just because they own a credit card. They should buy what they can afford to pay later on.
Each student card comes with a different set of requirements, so it is on the students to weigh which card offers them the perks that they are seeking. Carrying out due diligence at your end should be the first thing you ought to do. Having information on the credit card is vital for knowledge in the long run.