Yahoo Finance 3 Credit Cards College Students Should Consider
Numerous surveys have shown that many millennials just don't want them, with most opting for debit cards in the wake of an apocalyptic job market and crushing student loan debt. For those who do want them, credit cards just aren't always easy to come by. The Credit CARD Act of 2009 pulled the plug on banks advertising on campus -- no more free pizzas or T-shirts just for signing up for a card -- and also require anyone under 21 to either have a co-signer or show proof of income before they can even get a card.
If you are able to get a student credit card, there is good news, however: Your card's rates, rewards and other perks are probably better than what college students could get in years past.
That's the news from a new survey from CreditCards.com, in which we examined 11 of the most popular student credit cards on the market today.
We found that the average APR on a student card is about 13 percent today, compared to 16 percent in January 2008 -- just before the arrival of the Credit CARD Act -- and none of the cards reviewed have an annual fee. We also found eight of those 11 cards offer rewards to their customers, five offer cash bonuses and nearly all offer some sort of financial tools designed to help college students manage their credit more effectively.
Yet students should still adjust their expectations. The reality is that the best deals go to borrowers with the best credit. That means you shouldn't expect to get a 50,000-mile sign-up bonus, 10 percent APR or $5,000 credit limit on the first credit card you receive. Keep in mind student cards are meant to be stepping stones -- cards you use wisely for a while to build your credit before graduating to cards with better terms and more lucrative rewards.
All that said, here's a look at some of the best student credit cards on the market right now.
Discover it Chrome for Students
APR: 12.99 to 21.99 percent
Annual fee: None
Top perks: "Good grades rewards," free FICO scores, double cash back at the end of your first year, no late fee on your first late payment
This is my top recommendation among student credit cards. Its APR range is typical for a student card. It has no annual fee, no overlimit fee, no foreign transaction fee, no late fee on your first late payment and paying late won't raise your APR. It offers a 0 percent APR on purchases for the first six months. You get 2 percent cash back on up $1,000 in purchases at gas stations and restaurants each quarter and 1 percent on everything else, so there's no need to worry about rotating category sign-ups. However, the extras are what makes this card stand out.
This card offers $20 cash back each school year -- for up to the next five years -- if your grade point average is 3.0 or higher. Obviously, that's not going to change your life, but getting rewarded for something you're already going to do anyway is always a wise move. The bigger bonus comes at the end of your first year with the card. Discover will double all the cash back you've earned during that year automatically, which can always be used to pay down any balances.
Add in the fact that it comes with a free FICO score, payment reminders via text alert and is armed with a Freeze It switch that lets you make the card unusable temporarily if it goes missing, and you've got my top recommendation among student credit cards.
BankAmericard Cash Rewards Credit Card for Students
APR: 12.99 to 22.99 percent
Annual fee: None
Top perks: $100 sign-up bonus when you spend $500 in first 90 days, 3 percent cash back on gas purchases and 2 percent on groceries, EMV chip, 0 percent APR on purchases for first 12 months
A sizable sign-up bonus -- available only if you apply online -- makes this a hard card to ignore, but it is not the only thing the card has going for it.
The card's cash back offer on gas and groceries is strong, and it's also simpler to follow than a card that features rotating cash-back categories. In addition, you earn a 10 percent bonus every time you redeem your cash back into a Bank of America checking or savings account. If you're already a Bank of America customer, that can be a nice perk.
Finally, the card offers 0 percent interest on all purchases for the first 12 months, twice as long as what the aforementioned Discover card offers.
Another option: A secured card
Students may also want to consider a secured card. These cards allow for a young person to build a credit profile while keeping risk to a minimum for themselves, their parents and even for the bank.
Here's how it works: You are required to make a deposit into a bank account with the secured card issuer. That amount sets your card's credit limit. That's it. Essentially, you are borrowing your own money, but building a credit score at the same time. When you graduate to an unsecured card, the issuer will return your deposit.
I recommend the Capital One Secured MasterCard. There's no annual fee. The minimum deposit is $200. Your payment history will be reported to the credit bureaus, and you get free access to your credit score.
The Capital One Secured card has an APR of 24.99 percent. That's a bit higher than the top end of the APR ranges for the other cards mentioned, making it even more important than ever that you pay your balance off each month.
One Credit Card Takeaway
Regardless of the APR, job No. 1 for any cardholder is to pay your balance off at the end of each month and do it on time. If you can't pay the balance off in full, be absolutely, positively certain that you pay more than the minimum. If you don't do that, the math starts to work against you in a big hurry, and the value of any rewards you receive will be nothing compared to the interest you'll find yourself paying on a monthly basis.
Matt Schulz is the senior industry analyst at CreditCards.com, a site dedicated to helping people make smart decisions about obtaining and using credit. You can follow him on Twitter at @matthewschulz.
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