Best Student Credit Cards

Expert Q&A

Q1) What are the best features to look for in student credit cards?

Answer by: Ali Nejadmalayeri, Associate Professor of Finance, University of Wyoming

First and foremost, a credit card is a loan, not your money. So, you need to pay it back with interest. So, the first thing is to search for a low interest rate card that doesn’t jump after the introductory rate period. Or, at least introductory rates that last a while. But since you will be using it forever, then my preference is to start with low-rate ones. You’ll most likely have months that money is short.

Some offer extra if you use the card for tuition, or room and board. This helps if, for instance, you’re waiting for your financial assistance to come through, and you collect points. If you travel a lot because school is out-of-state, travel perks, gas perks, etc. might be something you want to look into.

Answer by: Jeffrey Jones, Department Head, Finance and General Business Department, Missouri State University

Those that have no annual fee, and a decent reward/cash-back program.

Answer by: Amit Sinha, Professor, Finance and Quantitative Methods, Bradley University

One of the features of some of the student credit cards is the cash rewards some of them provide. If students keep their card in good standing and perhaps maintain a good GPA, these cards may provide some cash at the end of the year or semester. This feature, not available for traditional cards, can act as an extra incentive for students to focus on their academics.

Q2) How should a college student plan to use a student credit card?

Answer by: John Sedunov, Associate Professor, Finance & Real Estate, Villanova University

In my view, the best way to use a credit card is to build credit. Don’t use it to buy things you couldn’t otherwise afford. Instead, use the card and pay it off in full every month.

This helps build your credit and enhance your credit score so that when it comes time for larger purchases like a car or a house, you won’t have trouble, and can potentially get better interest rates.

Answer by: Nicholas Wonder, Associate Professor, Western Washington University

Making purchases on the card and paying the balance each month can generate cash back and build a credit history without negative consequences. The student should be careful not to spend more than will be available to pay off the balance at the end of the month.

Downloading the transaction record each month or the annual summary the card company provides may be useful in tracking spending. Also, some cards offer extended warranties, rental car insurance, or other perks, and one needs to become aware of those services (perhaps by examining the cardmember agreement) to benefit from them.

Answer by: Ali Nejadmalayeri

The most prudent way to use the card is as a bridge loan that helps to pay for stuff while you are waiting for scholarships, fellowships, and bigger student loans to kick in. But remember, being a good borrower helps build the credit profile which you need for your car purchase, home purchase, etc. Make sure to pay on time. If you can, make the full payment. If not, avoid going over 50%-60% your credit limit. These are all hard things to do. I know, I lived it, so I am telling you from my own struggles as well.

Answer by: Jeffrey Jones

If a college student can manage their budget, and pay off a credit card balance in full each month, then it is appropriate to use a credit card for daily expenses. The first time a student is unable to pay off the balance in full, it is probably a good idea for them to cease using the card for daily expenses until the card balance is paid in full.

Answer by: Amit Sinha

Responsibly, I would say. One has to recognize that credit cards are a form of debt and irresponsible use will have detrimental effects.

Q3) What are some of the dangers that college students should be aware of with student credit cards?

Answer by: John Sedunov

Overusing the credit card is a clear danger and is related to what I said about the best way to use the card. Be aware that the card isn’t free money, and that the card will often have quite a high interest rate. It bears repeating that you should do everything you can to not use the card for anything that you couldn’t otherwise afford.

Answer by: Nicholas Wonder

Cash advances may be tempting but do not offer the grace period that applies to new purchases—interest is charged, and often at a high rate, even if the borrower pays off the entire balance by the monthly due date.

In general, buying more than one will be able to pay off at the end of the month is a bad idea; interest is high, and the student might struggle to escape the accumulating debt. Moreover, if a business checks the student’s credit score, a high ratio of debt to credit limit will not help.

Balance transfers offers may be useful on rare occasions, but keep in mind that upfront charges can amount to large annualized interest rates if, say, half of the balance would have been paid off six months from now anyway. In the other direction, failure to pay off the balance before the deadline for the low interest rate might be very costly. And if one ended up paying only the monthly minimum after the low-rate period, the lender might allocate that payment to the high-interest balance, meaning that new purchases would not benefit from a no-interest grace period.

Answer by: Ali Nejadmalayeri

Again, a credit card is NOT your money. So don’t assume a $5000 credit line means you can fly to Cancun first class and have a once-in-a-life-time Spring break. Do that and it will break you. And wreck your financial future.

It is very hard when times are hard to keep up with fully repaying cards. But try your best to keep it clean as often as you can. It’s good for your credit scores and it also gives you a lot of emergency lines of credit.

Answer by: Jeffrey Jones

The primary danger is the temptation to overspend, and to accumulate a balance that cannot easily be paid off each month. Interest charges generally only are assessed when the balance is not paid in full each month. Students often do not understand how the interest is calculated, or the actual rate of interest (which can be quite high).

Answer by: Amit Sinha

Student credit cards are a form of debt, and they are very easy to use. Repeated use without paying off the balances increases unpaid balances. Unpaid balances in turn increase interest payment obligations. Improper use will also affect credit scores adversely. That will have consequences, financial and otherwise, including getting jobs, renting apartments and getting a mortgage.

Q4) Why would you consider a student credit card over a traditional credit card?

Answer by: John Sedunov

You may consider this option if you don’t have a long or strong credit history. This may be the only option you have to start building credit and setting your future self up for success.

Answer by: Ali Nejadmalayeri

It really depends on your circumstances and what the card offers: rates, no-late fee, points for things you do (tuition, room, board, etc.). If the card is good, it stands out for things that matters greatly for a student. A card that offers points for air travel is probably not a good one for a student who is stuck in a dorm room, working many hours, are at the library and has limited financial assistance. You probably need that card when you get your first job as a sales-rep for a pharmaceutical company!

Answer by: Jeffrey Jones

The primary differences between a “student” credit card and a “traditional” credit card are that student credit cards tend to have lower credit limits and rewards/cash back programs targeted more towards the activities of a typical student.

Answer by: Amit Sinha

A student credit card is a good starter card. Oftentimes the credit and income requirements for such cards are a bit relaxed when compared to a traditional card, and hence it becomes easier to get. One can build one’s credit history using a student card so as to get a traditional card at better terms.