Editorial Policy

Tips for college students in search of that first card

Allie Johnson

December 1, 2014

Let's face it. Landing a credit card while in college often isn't easy. 

In fact, there are laws designed to protect young adults from getting into too much card debt that severely limit students' ability to even get a card. But the fact is, the easiest and fastest way to build credit is with that shiny piece of plastic.

“College students do need cards before they go out into the world and want to use credit for other reasons,” says David Weliver, founding editor of Money Under 30, a personal finance site for young consumers. Weliver says he gets emails from readers in their 20s who have trouble buying a house or even renting an apartment because they have no credit history.

The catch: You might need a job to get a card on your own. The CARD Act of 2009 put in place rules to keep college students from getting deep in card debt, so consumers under 21 must show they have income before they can get their own plastic.

“The easiest and most straightforward way is having a job and proving your income with pay stubs,” says Ken Chaplin, a senior vice president for TransUnion, one of the three major credit bureaus. But issuers will look at other sources of income, such as a trust fund or an allowance, he says.

Is co-signing an option?

If all of your cash flow comes from Mom and Dad or if you have no income, your parents might have to co-sign or add you as an authorized user to their existing card account in order for you to get one in your name. There are benefits to that arrangement, experts say.

“You should look at a credit card as a financial tool to establish credit, and not a means to buying more.”
–Mike Jelinek, The Simple Dollar

As an authorized user, you can use the card but the primary cardholder is 100 percent responsible for paying the bill. This is a good route to go — as long as the parents have good credit and trust you to use the card responsibly. When you co-sign, both parties are legally responsible for the bill. In both cases, any good credit behavior shows up on both parties' credit reports.

An advantage to co-signing or signing on as an authorized user: Mom and Dad can monitor the account and help teach the student to use credit responsibly, says Mike Jelinek, a blogger who has covered student credit cards for The Simple Dollar, a personal finance site.

And students whose parents co-sign might qualify for a higher credit limit than they'd get on their own, Chaplin says.

“That's because the card issuer knows the parents will be on the hook,” he says.

Card features that make the grade

If you have some income or a co-signer, one option is a student card. These cards have features geared toward college students such as:

  • Low costs. Take a close look at the APR and fees, Chaplin recommends. Check to see if there's an annual fee and look at the amount of the late fee, he says: “Make sure you understand the numbers on that card.” Most student cards do not have annual fees. However, APRs on some student cards can be slightly higher than on standard cards. For example, the APR on the Citi ThankYou Preferred Card for College Students can range from 13.99 to 23.99 percent, compared with 12.99 to 22.99 percent for the non-student version of that card. However, that's not always the case: On the Discover it student card, the maximum APR is 21.99 percent, compared with 22.99 percent on the non-student card.
  • Money management tools. Many student cards offer helpful features that encourage students to use credit responsibly, Jelinek says. For example, the Discover it card comes with a free FICO credit score. And the Journey Student Rewards card from Capital One offers a higher percentage of cash back (1.25 percent instead of 1 percent) when you make on-time payments.
  • Error forgiveness. If you're new to managing credit, you might make a mistake or two. Some issuers offer students the chance to slip up without getting penalized, at least at first, Jelinek says. For example, the Discover it student card waives the late fee for your first late payment and keeps your APR the same afterwards.
  • Starter rewards. Many student cards offer rewards, sometimes in categories aimed at students, such as restaurants, movies and gas, Jelinek says. But don't count on getting more than a little extra pocket money. “Issuers generally understand that a student is not going to be spending the same amount of money that a working adult will spend, so the benefits are less,” he says.This is most evident with sign-up bonuses. For example, the Citi ThankYou Preferred Card for College Students offers 2,500 bonus points (worth $25) for spending $500 in the first three months, compared with 20,000 bonus points (worth $200) for spending $1,500 with the regular Citi ThankYou Preferred card.

Alternatives to student credit cards

But what if you have no income, can't get a co-signer and no one will add you to their account? If you can't qualify for a traditional student credit card, you still have choices. For example, you can always get a secured card. A secured card requires you to put down a deposit — say, $500 — that serves as your credit line. In addition to having to pay a deposit, secured cards have other downsides, such as a low limit and no rewards benefits, Jelinek says. Also, you have to make sure the issuer reports to the three credit bureaus, because some don't, Chaplin says.

No matter what kind of plastic you get, it's crucial to pay your bill in full and on time and avoid racking up card debt so you don't graduate saddled with bad credit and interest on pizza you ate three years ago. “As a college student, you should look at a credit card as a financial tool to establish credit, and not a means to buying more,” Jelinek says.