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When it comes to credit cards for college students, there are two types of card issuers: Those who actively advertise student credit cards, and those who don’t. While you may think that the latter group don’t issue credit cards to college students, they do, and in many cases, with more favorable terms. Unfortunately, however, for students without a previous credit history, these cards are typically harder to be approved for.
The first group of card issuers includes major card issuers like Citigroup, Discover, and Capital One, which all are leaders in the student credit card space. These lenders advertise a variety of online student credit card applications, and offer credit cards without a co-signer to students between 18 to 21. While these cards offer the convenience of having a credit card, they can quickly become costly companions if not used wisely. Purchase APRs can range as high as 24.99 percent, and these student credit cards also feature high penalty rates for those who pay late or otherwise don’t comply with the card terms.
The second group includes card issuers that don’t actively advertise student credit cards, including issuers of low interest credit cards, as well as smaller banks and major credit unions, like the Pentagon Federal. Most of these card issuers, although not advertising it, do issue credit cards to students, even in the 18 to 21 age group, and many offer credit cards with APRs as low as 9.99 percent and far less onerous terms. The catch, however, is that students who don’t have some past credit history are less likely to be approved for these cards or (as in the case of Pentagon Federal), may be required to bring in a co-signer.
In short, getting approved for the best credit cards available to college students may turn out to be a two-step approach. If you’re just starting out building a credit history, the credit card options available will be limited, and the terms less favorable. However, those stage-1 credit cards are excellent tools to begin to build a credit history. This will enable you to qualify for credit cards with better terms in as little as 6 to 12 months.
If you are just starting out building credit, here are a couple of credit card options for college students without a previous credit history.
Leading student credit cards in this group include the Citi Forward Card for College Students and the Discover Student More card. The Citi Forward Card lets new cardholders earn up to 8,500 bonus points (redeemable for a $50 cash back) if they sign up for paperless credit card statements and make $250 in purchases within the first 3 months of opening the account. While the card advertises purchase APRs ranging from 12.99 percent to 19.99 percent variable, expect to get the highest APR if you don’t have a previous credit history. However, you can get that rate reduced by up to 2 percent by keeping good credit card habits like paying on time and staying under the credit limit.
The Discover Student More Card comes with 5 percent cash back in rotating categories, which change every three months (however, capped at $300 in charges every three months). For other purchases, the card offers 0.25 percent cash back up to the first $3,000 in purchases and 1 percent after that. The advertised APR on purchases ranges from 12.99 to 20.99 percent, again, however, students with a limited credit history can expect to end up paying the highest APR.
Both cards offer the convenience of having a credit card and can be extremely useful for starting to build your credit history. As mentioned above, however, like most other credit cards directly targeting college students, they become very expensive if not used right. Cash advances for both come with a $10 fee and accumulate interest at a 23.99 APR variable rate for the Discover student card and 25.24 percent for the Citi Forward card. Make one late payment, and the APR for future purchases jumps to 18.99 up to 25.99 percent variable on the Discover Student More card, and up to 29.99 percent for the Citi Forward card, and according to card terms, may stay there indefinitely for future purchases.
Because of their high interest rates, these cards are most useful not for carrying credit card debt, but for stepping stones for building your credit history. Pay the card on time, pay balances in full each month (or at the very least keep credit card balances at less than 30 percent of the card limit), and otherwise follow the basic guidelines for building a good credit score. With these good credit habits, in as little as 6-12 month, you may be able to qualify for credit cards with lower interest rates and otherwise more favorable terms. It also helps to open a checking and savings account, preferably with the credit card lender you eventually want to do business with.
