For most students, going to college means getting a credit card. With a first job, books-to-buy, and a load of loans, learning about credit becomes more important than ever. The best way to start is by choosing a student credit card that offers a low APR , low fees, and credit-management resources.
If this kind of terminology seems as confusing as your chemistry professor’s lectures, don’t fret! We’re here to breakdown each aspect of a good student credit card so you can make smart and informed decisions when approaching credit for the first time. Since we know you’ve got enough reading already, we’ll keep it short and to the point. No late night study session required!
The following is a list of key components to look out for when choosing a student credit card.
APR – APR stands for annual percentage rate and refers to the amount of yearly interest you must pay simply to use the credit card. Seek out credit cards that offer 0% APR introductory periods, and low APR is always a better choice. Most credit cards require annual fees, but many banks wave these fees for student cards.
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Low Fees – Because a credit card doesn’t mean free money, every card is set up with late payment and over credit fees, generally between $29-$39. Less common fees include balance transfer fees, international purchase fees, and cash advance fees. Try to find the student credit card with the lowest fees, because it’s easy to make credit mistakes as a financial newbie.
Rewards – Many student credit cards offer rewards systems, including cash back and point promotions. Cash back rewards give you a percentage (generally between 1-5%), of all your total spending in cash. With points rewards, you earn points for your spending, and the points can be redeemed in student essentials like airfare (for flying home for the holidays), books (for class), and CDs (for tuning out your chatty roommate). Many student credit cards increase cash back and reward values based on GPA, essential student purchases (gas, groceries, and books), and for paying bills on time.
Credit Management Resources – A smart choice for students is a credit card that offers credit management resources, such as budget calculators, free credit lessons, limit alerts, and bill payment alerts. The student credit card should be linked to a free online (and possibly mobile) account management service, so students can stay on top of their bills anytime, anywhere. Being able to track their credit cards online will encourage more regular financial monitoring.
Most student credit cards are geared towards college students, requiring the student to be eighteen years of age and to provide official proof of enrollment. Popular choices for current student credit cards include the Citi Dividend Platinum Select Card (5% cash back for the first six months), the Discover Student Card (1% cash back on all purchases after spending $3000), and the Capital One Journey Student Rewards Card (1% cash back, 25% bonus on the cash back you earn each month). All three cards include no annual fee and low to no introductory APR rates.
Of course, consulting your parents and your friends is a good way to learn more about their experiences with their first student cards. Make sure to research a variety of options and choose the card that best fits your particular lifestyle. And don’t forget, they may tell you your grades in college don’t matter but your credit choices do. We’ll give you permission to sleep through an 8am or two, but don’t forget to pay those bills on time!