While entering adulthood is a daunting task, starting to build your credit in college at a younger age is more important than you might think. Opening up a credit card catered to college students allows you to have a smaller line of credit, more rewards, and different ways to receive cash back.
Before going into what credit cards are best for students, here are some common things to know about credit cards and opening one up.
1. Credit Cards vs Debit Cards: A credit card holds funds that you borrow from the bank that you must pay back. They offer rewards and discounts when shopping at certain places, but also charge interest if you don’t pay your card back in full every month. A debit card, on the other hand, is a card linked to money in your bank account. There is no interest charge like credit cards, but you can’t build your credit.
2. FICO score: This score ranges from 300 to 850, 300 being very low and 850 being excellent. This score measures the likelihood of a person paying back a loan. This score is accounted for by your payment history (if you have paid your credit card bills on time or have missed payments), the amount owed (how much your line of credit is and how many different credit cards you have), credit history (how long you have been building your credit), credit mix (the different types of accounts you owe money to), and new credit. This score is really important because it affects whether you get approved or denied for things like a car, house, loans, and other credit cards.
3. Annual Percentage Rate (APR): APR is the cost of borrowing money. Typically, you want this percentage to be low because it will be the interest you pay for the unpaid amount left over on your credit card each month. This rate changes with a drop in credit scores or if the federal rate increases. The APR for credit cards can be very high, so you must be careful when putting money on your card.
4. Minimum Payment: This is the minimum amount you must pay every month to pay back the money spent with your credit card.
5. Credit Limit: The amount of money the bank allows you to borrow. For your first credit card, this amount may be small because you don’t have an extensive credit history. In this instance, the bank will take account your employment status and income.
Here’s some of the best beginner/student credit cards:
1. Discover it Student Cash Back Card
This card has 5% cash back on different spending categories every month, including gas, groceries, and different restaurants. It has 1% cash back on all other purchases. At the end of your first year with this card, you get unlimited matching on the cashback you earned, essentially doubling your cashback amount. You can also apply your cashback to Amazon purchases or even your card’s monthly bill. Since this is a card for college students, once you graduate this card turns into a standard credit card. This card has no annual fees and an APR between 18.24% to 27.24%, but for the first 6 months, it’s 0%.
2. Chase Freedom Unlimited
The Freedom Unlimited Card allows for 5% cash back on gas, grocery, and travel purchases, 3% cashback on dining and drugstores, and 1.5% cashback on all other purchases. If you spend $500 in the first three months of opening your account, you earn a $200 bonus. This card has an APR range of 20.49% – 29.24%, which is relatively high, but for the first 15 months, it’s 0%.
3. Bank of America Customized Cash Rewards Credit Card
This credit card offers 3% cash back in one category you pick, 2% on grocery stores and wholesale clubs, and 1% on all other purchases. In the first 15 billing cycles, there’s a 0% APR, but after this period it ranges from 18.24% to 28.24%. Similar to the Chase Freedom Unlimited card, you can earn a $200 bonus, but you must spend $1,000 in the first 90 days.
All of these options are really great for students looking to build their credit to better their future. They additionally feature no annual fees and have great cash-back reward systems, making it an easy incentive to use your new credit card wisely and for daily purchases. Overall, there are a number of different options for student credit cards, so pick the one that works the best for you!