Best Student Credit Cards & Tips For Smart Credit Use

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Student StudyingDuring a recession, the flow of credit tends to tighten up as banks and lenders take fewer “risks.” The result of this is that people who are credit-worthy but have no credit history, such as students, are caught in the middle. Without a credit history, they can’t get credit cards and loans. With credit cards and loans, they can’t establish a credit history.

An old standby practice, piggybacking, was recently eliminated as the new FICO score rules changed how it treated authorized users. In the past, someone with poor or no credit could “piggyback” as an authorized user on an account of someone with good credit. Many parents put their children on their credit card accounts to help them establish credit, the parents were “co-signing” their child’s debts, so it was perfectly acceptable. Unfortunately, people started abusing this and selling “authorized user positions” on their accounts, some for as much as $500 or $1,000 a piece, so FICO had to respond.

Fortunately, credit card companies recognize that students have credit needs and are often supported by their parents, so they’ve created student credit cards that low limits, reasonable rates of interest, and looser credit requirements. Companies like Discover and Citi have always been in the forefront of this and my first credit card was one issued by Citi based solely on my income being defined by my tuition payment.

The most important thing to realize, whether you’re the student or the parent of a student, is that a credit card should not be taken lightly. A lot of students fall into the trap of not recognizing that credit is still money and that you shouldn’t be spending money that you don’t have. I think having a credit card is important, getting one is one of my 40 college money tips, but fiscal responsibility is far more important. One of the great things about student credit cards are that the limits are low but you can still fall very deep into debt. Only spend that which you can repay within the grace period and never carry a balance. If you don’t think you can do that, avoid these things at all costs.

Here are some other tips for smart credit use:

  • Pay with credit only if you have the cash for it: If you don’t have the cash to buy something, don’t put it on your credit card. A $10 pizza can become a $100 pizza if you make only minimum payments and stretch it out as long as they will allow it. If you have the cash, you can pay off the bill after the grace period and take the rewards to the bank.
  • Shop around: It’s important to review all the terms and conditions of your card and shop around for the best credit card, because small differences matter. A bonus here or a reward there can really help make your money go farther.
  • Never carry a balance: When you carry a balance, your grace period goes away. As a student with limited income, you should never carry a balance because that is a beast you are ill equipped to handle. With little to no income, your balance can spiral out of control. You might end up with tens, if not hundreds, of thousands of dollars in debt with nothing to show for it.
  • Understand your limits: It’s important to know what your credit limit is so you don’t get a punitive fee for going over your limit. This tip also refers to understanding how much you can spend based on how much you earn. A credit will let you go into as much debt as you want, because they will earn their interest as you struggle to repay it.
  • Never pay an annual fee: Whenever I see a credit card offer the interests me, I always look to see what the annual fee is. If the annual fee is more than $0, I don’t even consider the card. Credit cards earn money when you use them, they charge the merchant a small fee, there’s no reason why I should pay them for the opportunity to make them more money!
  • Avoid stupid fees: Remember when to make your payments, remember your credit limits, remember everything so that you don’t get dinged $35 for missing your payment by a day (or a minute). Develop good credit card habits and you can use them like a tool, rather than a crutch.
  • Know when to walk away: If you can’t be responsible with credit, don’t be stubborn. If you know you can’t spend within your means, cut up your cards, focus on paying down debt, and live a cash-only lifestyle. Credit cards are double-edged swords, they cut both ways. If you find yourself being hurt by them, cut them up, repay your debts, and never use them again.
{ 18 comments, please add your thoughts now! }

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18 Responses to “Best Student Credit Cards & Tips For Smart Credit Use”

  1. Philip White says:

    Jim, though I agree that a typical student has no business paying annual fees, I disagree that this is a general principle. The reason is that with some cards, an annual fee comes with a higher cashback percentage. If you enough, the cashback exceeds the fee.

    Having said that, there’s a caveat: you must maintain a high enough spending to make the annual fee worthwhile. This is the reason I don’t have a card with an annual fee: as I try to cut down on my spending, I don’t want to feel forced to spend more than necessary to justify the fee.

    My anecdotal evidence tells me that there are plenty of people who charge thousands of dollars monthly on a credit card. For those, the higher cashback greatly outweighs the annual fee, and they come out way ahead.

  2. Olivia says:

    My husband just got the Discover Student card and we are very happy with it. We researched credit cards a lot before we chose one. The student card offers the same rewards as the Discover More card. You can read about our search on my blog.

    Philip–I agree that when you spend a lot an annual fee may be worth it, but I do not believe that most people spend that much. I think the majority of people are better off with cards without an annual fee.

  3. Glenn Lasher says:

    Off-topic, Jim, but are you located in Albany, NY? That photo is from the University at Albany campus, near the student union.

  4. chelle says:

    I was declined for the citi credit cards because I do not already have a credit record. Ah, life. So I am still looking for a way to establish credit, but I wanted to let you know that citi does not help out the average student.

  5. Ap says:

    I graduated high school early this year and have been working in the banking industry since. It is IMPOSSIBLE for me to get any sort of credit card. How am i supposed to build my credit without one? I was wondering if you HAD to be a college student to get one of the discover cards. I do not plan to attend college at this time because of the job I have been fortunate to recieve at a young age, it does not say anywhere on there sight if being a student is a must. This is the only card i have a chance to be approved for. If anyone knows the answer to this i would be very happy.

    • tb says:

      For those who are struggling getting their credit build the best way is to get the secure credit card from your bank where you have checking or saving account.I did this 2 years ago as I had no credit at all and within a year I got it on about 550 and now is within the 20% of consumers with excelent credit card. It as well builds a discipline for paying your bills and staying within the limit. Hope this helps.
      By the way I have a credit card with annual fee. You have to figure if you spend montly 250$ on credit card with APR and it is lets say 11%, that comes out to 27.5$ montly in APR and 330$ per year. I pay my annual 100$, so I guess saves me money and do not have APR and have a membership reward points that I cash in.

      • KC says:

        I was told that even for the secure credit card, or the student bank card, I still need someone to co-sign for me. My parents are in no shape to do that for me, and I am over 18. I have a steady job, but am not currently enrolled in school. Are the two cards above still feasible?

    • Lind says:

      You have to attend a four year school for the discover card.

  6. aua868s says:

    my fav when i was a student was the citi divident mastercard…it still is…but the only caveat is the cap on the cash back of $300/year.

  7. Tom says:

    What is the spending limit on the Discover Student Card?

  8. Boris says:

    I started my CC history with Chase at age 16 or 18 (forgot which), by putting $400 into a secure secured credit card. I’ve used that CC card for almost everything but I paid in full and in time. I’m now 20 and have a non-secured CC with $600 credit limit and 18% APR.

    So my suggestion: go with secured credit card and use it for everything, but make sure to not miss a single payment and if possible pay in full each time. After a year or so you should be eligible for a non-secured CC with an amount of ~$200-300

  9. David says:

    Ok so I am a current student, I am trying to find a job but can’t seem to get one because I have no experience and go figure I can’t get experience if I don’t get a job. But I tried getting a card through my bank and I was rejected, and now I am trying for the Discover card. I was just wondering what my chances are for getting the card? I know it works wonders in 6 flags as well which is my 2nd main appeal to Discover.

  10. Tony says:

    It has always amazed me how may people carry balances. They way I look at it is that things cost enough without having to pay interest on them too. If you cannot pay in full at the end of the month, then just do not buy it or it will end up costing even more!

  11. Jaime says:

    I just applied and got approved for the citi forward card today. I don’t know why some ppl get approved and others don’t because I have no credit at all and alot of loans. This is my first card and I wanted it for emergencies since I’m moving far from home and I want to establish my credit before I buy a car next summer.

  12. Paula says:

    I am doing a research for my personal finance class and I’m wondering, what is the credit limit and the minimum payment for the Discover Student Card? 🙂

  13. Matt says:

    Does a student card mean they accept all applicants with no credit history or do they factor in other things such as income as well, anyone know?

  14. Carl says:

    A card that is not on this list is the Paypal “Smart Connect” Card. Although you cannot use it for anything other than Paypal purchases, it is very easy to get and will help get enough credit rating for another card after a few months.

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