10 Best Credit Cards for Students of 2018
Credit cards are usually only thought of as an alternative to cash, and a way to pay for purchases, but they can do much more than that. When used correctly, credit cards can provide excellent opportunities for building credit, developing responsible financial habits, and obtaining benefits or rewards. A good credit score and history is the backbone of financial stability, allowing people to obtain favorable mortgage rates when purchasing their first home, get approval for apartment rentals, cheaper insurance, and even a new cell phone plan. Credit cards allow consumers to borrow money from banks and make purchases or payments. If users reimburse this "loan" within a certain time, known as a grace period (generally 25-30 days), they aren't charged interest. However, failure to pay back what the money they've used means that consumers must then add a percentage of their balance to their total. Interest rates for credit cards are usually stated yearly (Annual Percentage Rate, or APR), and the lower the APR, the easier it is on the consumer's pocket.
Aside from their conventional offers, credit card companies also have some products that are specifically tailored to student's needs. These cards can be extraordinarily useful in helping students develop responsible spending habits, obtain rewards for purchases or on-time payments, and build their credit easily. There are two main types of credit cards available: secured and unsecured. Secured cards are backed by a cash deposit as collateral, and are not to be confused with pre-paid cards, which function more as debit cards, deducting expenses from a pre-established, pre-paid balance. Unsecured cards are more risky propositions for issuers, as they aren't backed by any collateral. Credit limits are determined by income level and credit history, and limits are therefore generally lower than for unsecured cards. Usually, students start with secured cards, or are required to have cosigners for unsecured ones.
When students look at the multitude of credit cards on the market, they should consider what use they have in mind for the card. When evaluating various student credit cards, we noticed that they couldl be divided into three major groups. In the first place, we found many cards offered rewards or cashback on purchases for things such as groceries, wholesale stores, gas, or dining out. Though these may have higher interest rates, if the user plans on fully settling their balance at the end of each month, these cards can be a great option. A second group of credit cards is designed specifically for students in exchange programs, or with extensive travel plans. These cards usually don't charge foreign transaction fees, offer unlimited and non-expiring rewards that are earned specifically for travel-related expenses, and have low or non-existent annual fees. Finally, a third grouping of student credit cards excel at assisting users to develop responsible financial habits and grow their credit. These cards may offer good grades rewards, points or cashback for early payments, and increase credit lines for punctuality.
Apart from thinking about their needs and uses for their new credit card, students should also look at the qualification requirements for each card they're considering. If they have no employment or proof of income, they may have to find a co-signer for their card, especially if they're under the age of 21. On the other hand, companies that issue student credit cards usually have less stringent credit requirements, on the understanding that most students, if not all, have little to no credit history. Students should read all the fine print carefully, in order to be fully aware of the consequences of late payments, and make a risk-benefit analysis. If their income is unstable and their saving habits leave much to be desired, the higher APR of a card with amazing rewards may be cancelled out due to late payments. Interest rates can also vary according to the type of purchase, and it's essential to know exactly how much an issuer will charge per transaction. Finally, all applicable fees should be taken into account, aside from annual and late fees, such as transaction fees or balance transfers.
Top 7 Companies
- Easy-to-meet requirements
- Travel protections
- Purchase protections
- First late-fee waiver
- All the benefits of a MasterCard Platinum
- Ideal for foreign students
- Best rewards potential
- Get an unlimited dollar-for-dollar match of all the cash you've spent your first year
- No annual fee
- Cash back rewards for good grades (above 3.0)
- Freeze your account in seconds
- Receive your FICO score for free on monthly statements
- Pay on time to boost cash back from 1% to 1.25% for that month
- Higher credit limit after making five monthly payments on time
- Unlimited access to your credit score through CreditWise®
- Ideal for travel: no foreign fees, travel insurance and 24/7 assistance
- Access to Visa® Platinum benefits
- High variable APR: 24.99%
- Excellent choice for students studying abroad
- 0% introductory APR for the first 12 months
- Points are easy to earn and never expire
- Requires good to excellent credit score
- Earn 1% cash back on every purchase
- Overdraft protection and no annual fees
- An introductory APR of 0% for the first 12 billing cycles
- Reasonable APRs from 14.24% to 24.24%
- A $150 cash rewards bonus for $500 in purchases in the first 90 days
- Excellent security features with suspicious activity alerts
- Online and mobile banking services with live chat support
- Sign-up bonus and no annual fee
- 0% introductory APR for seven months
- 2x the rewards for entertainment-related purchases & dining out
- Travel and purchase protection
- Freeze your account if your card is lost or stolen
- A convenient mobile app
How We Compare Credit Cards for Students
When we looked at the overall characteristics of different cards, we took various features into consideration. In the first place, and most importantly, we considered their annual percentage rate (APR). Though most student credit cards have high APRs, as applicants lack substantial credit history, this should still be the jumping-off point when comparing offers.
We also took into account whether the card was secured or unsecured, and whether the company required a co-signer. Many student credit cards require co-signers for applicants under 21 if there is no evidence of income, especially since the consumer-protection CARD act of 2009, which enacted a range of regulations, including how and when credit card companies could market and send offers to young people. If those circumstances don't apply, then the next step is A qualified co-signer must be over 21 years old, with a good credit score and established credit profile. Co-signers act as guarantors, and are therefore held ultimately responsible for repaying the debt if the primary borrower is unable to do so. Other requirements can include employment history, proof of income, and security deposits.
Lastly, we looked at whether the card had a smart chip. Before 2014, it was believed that there were enough safety measures in the United States to avoid credit card theft or fraud. The price of incorporating smart chip technology was significant, and there was some pushback. However, a series of massive credit card data breaches convinced credit card companies and the Senate Judiciary Committee of the need to make the switch. Chip and pin technology uses multiple layers of security, including a chip that stores and transmits encrypted data, a unique identifier that changes with each transaction, and a PIN number to authorize transactions.
Many student credit card companies feature significant rewards and benefits, for a multitude of different things. These come from interchange fees, or the fee that a merchant's bank pays to a customer's bank when they use a card to pay for a purchase or service. Though these can vary, they usually clock in at 2% or more, which covers the rewards on competitive rewards and benefits cards. A few credit cards have rewards of up to 5% or 6% on some types of purchases, though these tend to have caps after certain monthly, quarterly, or yearly dollar amounts.
Cash back is one of the most widespread rewards, and can take various forms. Some cards offer one-for-one cash back of all the purchases made during the first year, and a separate 5% cash back each quarter, at a variety of different locations (which can remain fixed or change monthly or quarterly), such as gas stations, grocery or wholesale stores, Amazon, or restaurants. Other purchases tend to offer only 1% cash back.
Point systems are another way in which many credit card issuers distribute rewards. These work a little differently than cash back benefits, as points don't necessarily correspond one-to-one with dollar amounts. For instance, a card may issue 2,500 bonus points for the first $500 spent in the first three-month period, and then hand out double points for each dollar spent in restaurant and entertainment purchases. Points can generally be redeemed for merchandise, travel, gift cards, and cash. However, keep in mind that in some cases, 2,500 points will only translate into a redeemable $25.
Rewards can also be offered for things completely separate from spending. A few credit card companies we reviewed focus on developing responsible spending habits, and to that end, extend higher percentages of cash back for timely payments, paying balances in full, and even for getting consistently good grades. Finally, some companies also offer sign-up bonuses, which usually take the form of lower or even zero APRs for a certain period of time, after which interest rates rise.
As we mentioned before, student credit cards can generally be classified according to the use for which they're best suited. Some cards are a better option for students with zero credit who need to learn how to manage their finances responsibly. Others offer benefits for travelers or foreign exchange program participants that go above and beyond the norm. Lastly, some credit cards provide the best rewards for purchases made in restaurants and grocery stores, or on gas and entertainment. Students should take their spending habits into consideration when choosing between credit cards, as a little bit of forethought can translate into greater benefits down the line.
Obtaining a first credit card can be a daunting experience, especially for students, who may feel like they need a helping hand throughout the process. Check whether the company has a mobile app, where users can monitor spending and other charges; and how customers can communicate with the company, (via live chat, phone, or email). The ease with which cardholders can get in touch with a company is a good indicator of trustworthiness.
Another good thing to consider in this case is the degree of customer satisfaction reported by current cardholders. Independent customer review organizations, such as the Better Business Bureau and TrustPilot, are an excellent resource for researching how one company's customer experience stacks up to another's. Another idea is to look at a company's number of complaints on the Consumer Finance Protection Bureau's website. This powerful and independent watchdog agency was created in 2011 after the financial crisis, to work for American consumers, businesses, and the economy as a whole, ensuring fair practices.
Customer Questions & Answers
Why should students build credit?
Students should build credit so that they can learn how to become financially responsible and to start establishing their credit history, which is the foundation for their adult life. Building their credit will help them in a world where loans and mortgages are an inevitable aspect of adulthood. They will be ready to rent an apartment, apply for a loan, and, eventually, their first mortgage.
How can students build credit?
In order for students to build credit, they are going to need to either apply for a credit card or become an authorized user in their guardian or parents’ account. By getting their own card and using it responsibly, students can begin to build their credit history.
Can international students apply for a credit card?
International students can apply and get approved for a credit card. There are several credit card products made specifically for international students and immigrants.
Usually, one of the requirements for applying for a credit card is having a valid Social Security number. However, the cards for international students only require a passport and student ID. One of these credit cards is the Deserve Edu card.
How can students increase their chances of credit card approval?
To increase the chance of getting approved for a credit card, students must apply for a credit card product that is specifically designed for them. These types of credit cards take into consideration the fact that most students do not have an established credit history when they first apply for credit. Another option is to get an adult to co-sign for them.
Do students need credit in order to get approved?
Students do not need to have credit in order to get approved for a credit card. However, it is important to apply for the right card, one specifically designed for students. They should research the different credit card products available for students and check the application requirements before applying.
Do student credit cards have smart chips?
Not all student credit cards have smart chips. Nevertheless, banks are currently in the process of replacing all cards. The process has been slow, but eventually, every card that is issued should have one. The information in the chip is used to authenticate transactions securely.
This global standard for credit cards, called EMV, was developed by American Express, Discover, and other multinational financial institutions to improve security and minimize the possibility of fraud.