The Credit Card ACT of 2009 has made life more difficult for students looking to apply for a credit card.
Previously, if you were a college student, there was no age limit on whether or not you could obtain a credit card.
In an effort to protect students from the dangers of credit cards, Congress passed a law requiring all students under the age of 21 to have a parental cosigner OR show sufficient income when applying for a credit card.
As a result of the Credit Card ACT of 2009, credit card rewards and offers have suffered a bit and this has certainly filtered through to college student credit cards. Still, there are a good number of solid student credit card offers represented below.
If you own a student credit card you feel deserves to be on this list, let us know and we’ll gladly add it.
But before we get to the list, it’s important to mention that a student must have OK credit in order to be approved for the cards below. If you have bad credit (defaults, many late payments, collections) then applying for a credit card is only going to hurt you.
If you do not know your current credit score, both Credit Sesame and Credit Karma offer totally free accounts to check your credit score. Signing up takes one minute, requires no credit card and does not trick you into paying for anything. No free trials or sneaky business, just 100% free credit score accounts.
PT’s Pick for Best College Student Credit Card
Citi ThankYou® Preferred Card for College Students – Earn 2,500 Bonus Points – The only credit card that rewards good behavior, the Citi ThankYou Preferred Card for College Students – Earn 2,500 Bonus Points offers a 0% intro APR on purchases for seven months, 2x ThankYou Points on dining and entertainment and 1 point per $1 on all other purchases.
The Citi ThankYou Preferred Card for College Students – Earn 2,500 Bonus Point does not have an annual fee and you can earn 2,500 bonus ThankYou Points after you spend $500 in purchases within 3 months of account opening from our partner Citi.
Discover it for Students – Good Grades Rewards – The big draw from the Discover it for Students card is the $20 bonus all cardholders that can show a GPA of 3.0 each school year.
Also included is 5% cash back on rotating categories throughout the year and 1% cash back on all other purchases with DOUBLE cash back earned for the first year.
There is no annual fee to own the Discover it for Students card and another benefit of owning is a low APR (compared to other student cards)(standard purchase APR is 13.24% – 22.24% variable)
Journey Student Rewards from Capital One – For students with average credit, the Journey Student Rewards from Capital One is the best student credit card available (all other cards on this list require good credit).
1% cash back is given on all purchases; with a 25% cash back bonus awarded each month you pay your bill on time. This means that effectively, the bonus is 1.25% on all purchases, also the highest on this list.
There is no annual fee on this college student credit card and the variable APR is 20.24% variable and the Journey Student Rewards from Capital One also gives access to your monthly credit score, plus an interactive tracking tool to help monitor your credit.
Advantages of Credit Cards for Students
Some would rightly argue this doesn’t matter. But if your desire it to have a healthy relationship with credit, and for that healthy relationship to be known to future employers, lenders, and others, then starting early might be a good idea. After all, length of credit history is one of the factors that make up your credit score.
Before the New Rules Kick In– As I’m sure you’re aware of, President Obama recently signed into law some hefty changes to the way credit card companies conduct their business here in the US. One of the changes, resulting from the new credit card law, is the way young people can use credit.
“For consumers under 21 years old, a company must get the signature of a parent or another to take responsibility for the debt, or it must obtain proof that the under-21 consumer can repay credit.”
Teaches Responsibility – A credit card for a student can be a great way for parents and their kids to learn the proper use of credit cards. Working together, fully aware of the rules, parents and their kids can build a healthy relationship with credit. Learning to properly handle a credit card can help you when it’s time to handle a mortgage, or a small business loan.
Emergency Use – Just like a good cell phone plan, it’s good to have a credit card in your kids hands, if only for emergency use. They don’t take checks anymore at most places, so you don’t want your kids trying to use a check or scrounging around for enough cash to get them out of a jam. A good, low limit card would be ideal for this situation.
Build Rewards – This is my favorite aspect to the credit card. I love earning points. It’s free money! I typically trade my points in for cash at the end of the year. But there are many ways to uses these points. And as you’ll see in some the offers below there are some very good reward systems for cards used on purchases that college students are already planning to make: books, movies, etc.
Small Credit Limits– Most student credit cards are going to come with a very low credit limit. This low limit will help to reduce the amount of damage that could potentially be done to the students credit history, and your wallet. In my example above, the damage I could do was limited by the amount the card company would let me borrow.
A Parent is Involved – I’m speaking to the parents here. When you help your kid sign up for a card and teach them the proper use of it, you’re maintaining control of the situation. Your kid won’t be going behind you back, like I did, to get credit and then abusing it.
Disadvantages of Student Credit Cards
Can Add Stress (“One more thing to worry about.”) – College can be tough enough with all the changes and new things to learn. Living by yourself, making it to classes and/or a job. A credit card just adds complexity to the whole situation.
Maybe it’s best if you introduce your kid to a credit card when their a sophomore or junior. Or at least when they have a job to be able to pay it off themselves.
Chance of Inappropriate Use – This is the biggest fear of anyone thinking about giving a college student a credit card. Armed with a credit card and a lack of knowledge about the proper use of the thing, a college kid can quickly do some damage.
Some parents, and now the US Government, feel so strongly about this that they think it’s best to take an abstinence approach: just don’t allow a student to apply for a student credit card.
Increased Spending– It’s no secret that we spend money more freely when we use credit cards. It’s not cash. You don’t see the cash exchanging hands. It’s painless. Until the bill comes, right?
Parents, college kids are going to use the credit card on some ridiculous things. You don’t want them using the card to inflate their lifestyle. So that’s a legitimate disadvantage there.
Most of these disadvantages, I believe, can be neutralized by limits set on the card and if the parent takes the time to explain the proper way to use a credit card.
College Days: My First Credit Card
When I went to college, my parents were generous enough to give me plenty of cash in my wallet and access to a checking account.
Whenever I needed money, I’d just reach into my wallet or write a check for the amount. It was easy. In the rare instance someone didn’t take my check and I was out of cash, I’d head over to Wal-Mart, buy a pack of gum, write the check for $20 over, and walk out with cash in hand. So “old school”.
The only cards I had were my driver’s license and a student ID card.
I suspect my parents liked this method because they had control over the money in the checking account and didn’t have to worry about me blowing a bunch of cash. They told me I was responsible for keeping the ledger and knowing what my balance was. Which I did, for the most part. I think I occasionally over-drafted the account. It was a good system overall though.
This system kept me debt free and my spending under control. But is wasn’t teaching me anything about using credit responsibly. Of course, I didn’t have any income yet (I was playing football and had no time for a job) so I probably didn’t need a credit card. How was I going to pay it off?
Around my sophomore year in college, I was approached by a credit card vendor (in the student union, mind you) to apply for a student credit card in exchange for a t-shirt. I don’t remember what I was thinking, but I’m sure it was something like, “Cool t-shirt. I’d like a freebie.”
I also thought it wouldn’t be the worst thing if I got a credit card out of the exchange. So, I signed up.
I can’t imagine what I put for income or assets. Must have been a couple of $0’s. A few weeks pass and I have a Discover credit card in my hands with a credit limit of $500. Sweet! I had a credit card, had no money of my own, and didn’t even have a job. :p
I can’t remember if I told my parents or not. I may have kept it a secret. I also can’t think of what I used the card for. But I can bet it wasn’t used responsibly.
Fast forward to the end of college and that one card with the small limit had turned into two cards with balances in the thousands. I had a few jobs in college so it wasn’t a total disaster. I paid them down occasionally.
Once I was established in my career, post-college, I got the cards paid off and have since learned the proper way to use the credit card, but the initial damage was done. I paid a ton of money in interest charges and probably late fees because I didn’t know how to use my card the right way.
I have no one to blame but myself either. I should have learned how to properly use the cards and should have let my parents help me understand how to use them. Luckily I was able to recover from the damage.
Whether your a new student yourself, or a parent, I told this story not to scare you away from credit cards completely, but to encourage you to learn the pros and cons of using cards as a student. And to show you that with the right approach, a credit card for a college student can be a good thing.
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