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Being in college is all about learning new skills. Sometimes that means learning how to cook on your own or how to manage a busy class load.
Learning how to build a credit history is one of the many skills every college student should have. It may sound strange, but using a credit card can build those skills and create solid financial habits.
Having a credit history is necessary for post-grad life. Learn how to use student credit cards to create your own financial opportunity.
How Student Credit Cards Improve Your Credit
Using a student credit card in college can build your credit score so you have a reputable credit history when you graduate. Having a solid credit report will help you rent an apartment without needing a cosigner or sign up for utilities without putting down a deposit.
Some employers will check your credit report, and a good report will make you a more attractive candidate. If you have student loans, a good credit score will make you eligible to refinance those loans for a lower interest rate.
It can take at least a year to build a credit report so starting while you’re in college will make those first couple post-grad years much easier.
How to Use a Credit Card Responsibly
A popular myth about credit cards is that you should always keep a balance on the card, even if you can afford to pay it off. Some people think their credit score will suffer if they pay their balance in full.
This piece of advice is false. The key to building a credit report is to make charges on a credit card, wait for the statement period to end and then pay off the balance on or before the due date.
If you pay the balance before the billing period is over, you’ll have a $0 balance on your statement. Having no balance won’t improve your credit score. You have to let the statement period end so the credit card issuer can report a balance to the credit bureaus.
The easiest way to be a responsible credit card user is to make a few small purchases each month and set up automatic payments for the full amount. This strategy ensures you’ll never forget about a payment and you’ll never owe more than you can afford.
Add a couple small recurring bills like your Netflix or Spotify subscription to your credit card. Make sure the amount equals less than 30% of your available credit limit. Charging more than 30% of the credit limit will ding your credit score.
Check your credit score for free through the Mint app, which updates it once a month. If you notice something wrong, contact the credit bureaus immediately. You can view your credit report for the three credit bureaus at AnnualCreditReport.com.
Student Credit Cards
Bank of America® Cash Rewards Credit Card for Students
This card is the only one on this list that has a sign-up bonus. Students who spend $1,000 or more in the first 90 days earn a $200 bonus.
Cardholders can earn 3% cash-back in one of the following categories: gas, online shopping, dining, travel, drug stores, or home improvement/furnishings. They earn 2% cash-back at grocery stores and wholesale clubs and 1% cash-back on all other purchases.
This card has no annual fee, and there is 0% APR for 12 months. After that, the rate switches to 16.24% – 26.24% APR.
The Discover it Chrome is a student credit card that also provides extra words. The card offers 2% cash-back at gas stations and restaurants, up to $1,000 in purchases each quarter. You’ll earn 1% cash back on all other purchases. Discover will also match all cash-back after the first year.
Discover also rewards users who perform in the classroom. They provide a $20 statement credit for each year that you have a 3.0 GPA or higher, up to five years.
There’s no annual fee and a 0% intro APR for six months. After that, the APR changes to 15.24% to 24.24%, depending on your creditworthiness. There are no foreign transaction fees, helpful for students who spend a lot of time abroad.
Students earn 2x points at gas stations and supermarkets up to $6,000 in purchases annually and 1x points on all other purchases. Purchases also round up to the nearest 10 points, which helps earn rewards faster. When you redeem points, Citi will give you a 10% bonus, for the first 100,000 points.
The card has a 0% APR offer for seven months. The regular APR is 16.74% – 26.74%. This card has no annual fee. This is the only card on this list with a 3% foreign transaction fee.
A secured credit card works differently than a regular credit card. Because it’s designed for those with no credit or bad credit, a secured card usually requires a deposit to serve as collateral. This card requires at least a $200 deposit. After eight months, Discover will review your account to see if you’re ready for a regular card.
Your best option is to use a secured card if you tried to apply for a regular credit card and were denied. The Discover it Secured is one of the best options in this category.
Like the Discover Chrome card, cardholders earn 2% cash-back on restaurants and gas stations up to $1,000 in purchases per quarter. Discover also matches all cash-back earned for the first year.
The APR is 25.24%, and there’s no annual fee.
The Journey® Student Rewards from Capital One is a great choice for students who want a rewards card. Cardholders earn 1% cash back on all purchases and an extra. 25% when they pay on time.
The APR is 26.99%. There’s no annual fee and no foreign transaction fees, perfect for a student studying abroad or backpacking in Europe.