Should your college student own a credit card? That’s an interesting question that many parents dwell upon. This much is true: applying for and finally receiving that first credit card is a big step for any individual. I believe that it can be helpful for someone to become exposed to using a credit card early (with caveats), depending on how “ready” for this exposure the individual is. With the appropriate guidance (and guidelines), using the right kind of credit card can prove to be a helpful financial tool for a student. What distinguishes a student credit card from all other cards? Usually, they offer lower interest rates and a lower spending limit than regular credit cards.
Let’s start out by identifying which credit cards may be most suitable for college students. Then we’ll cover some important points about card use.
Best Student Credit Cards For College Students
Here are a number of good rewards credit cards that are geared towards the younger set:
1. Discover Student Card: You’ll earn 5% cash back on choice spending categories such as travel, gas, restaurants and groceries and 1% cash back for everything else. The Discover Student Card is also a 0% APR credit card that offers no interest rate for 6 months for new purchases. It has no annual fee.
For more information, please visit this link.
2. Citi mtvU Platinum Visa for College Students: This card has no annual fee and offers 0% APR for 7 months for purchases if you qualify. This is a rewards card that will give you 5 reward points for every $1 you spend on books, movies, music and restaurants. For $1 spent on everything else, you’ll earn $1. You’ll also earn 25 reward points per month if you stay below your credit limit. There’s also an incentive to get good grades: earn up to 2,000 reward points twice a year with proof of a good GPA. Check out their “GPA vs reward points” table:
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For more information on Citi mtvU Platinum Visa, you can check out this link.
3. Citi Forward Student Card: Here’s another no annual fee rewards credit card that rewards you for good behavior. It’s also a 0% interest credit card that won’t charge you interest for 7 months for new purchases. With this card, you’ll get 3,500 bonus points after spending $250 in 3 months, 2,500 points when you go paperless and 5 reward points for each $1 you spend on restaurants, music, books and movies. You’ll get 1 reward point for each $1 spent on everything else. For managing your credit well, you’ll be eligible for up to a 2% reduction on your APR and an extra 100 points per billing period. For more details, check out this link.
Tips For Using A Student Credit Card
I am a firm believer that one’s money management habits are forged at a young age. I believe that anyone can learn how to manage money and understand credit cards while in college or shortly thereafter. But on the flip side, if you aren’t savvy with money or tend to hang out with friends who are spendthrifts, you may end up developing some bad habits. If you are a student and want credit, you need to understand what you are getting into. It would be great if all of us learned about money management and paid more attention to the basics of credit card use right when we start using credit cards.
I learned a few things when I got a hold of my first few credit cards — that there’s a right and wrong way to use them. Like anything else, there are pros and cons to using a student credit card. Let’s review some of these points:
The Pros
For students, one big benefit that credit cards provide is the convenience that they offer when there are emergencies. Who knows what emergencies a student will encounter, and it is comforting to know that your college student can be financially covered with a credit card in such cases. Typical scenarios might include vehicle breakdowns and attendant car repairs and towing expenses, motel bills, meals, doctor charges, or midnight apartment repairs, such as water leaks. But impromptu trips to the Bahamas certainly don’t qualify as an emergency!
Having a student credit card will help your child learn how to be financially responsible and will also help them develop a credit history.
Here are some ways to start off on the right footing with your college student: Teach your kids to use a credit card only if they can pay off their balance in full each month. Point out that using a card for installment payments is a no-no. Other good habits to develop include keeping one’s balance below the credit limit and always paying on time.
Finally, show your kids that by using a credit card in the “right” way, they can potentially receive rewards; and using cards irresponsibly can lead to financial problems later. Making these distinctions early should help your child develop a healthy outlook on debt, credit and money management.
The Cons
One of the biggest arguments against credit cards for students is the potential for these cards to get an unsuspecting teen into financial trouble. There’s the potential to develop bad money habits when you own a credit card: one month of not paying off your balance can easily snowball into something more problematic, and where can that lead you? When you accumulate debt early in your life, it’s a problem that becomes much harder to surmount.
A student may end up with several credit cards, repeating the same mistakes with each one. It therefore goes without saying that credit cards should be used with caution especially when a student is first starting out as a card holder. If you’re a parent, you must first determine if your child is ready to start using a card, and before you give them the green light for this, lay down your ground rules well in advance.
Contributing Writer: BEM
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{ 10 comments… read them below or add one }
I have the Citi mtvU card and I can give a positive testimonial for it. It’s a great card catered to students. Wholly recommended!
Ahhhh, credit card for college kids, where it all begins
I just have one rule, and that is: Don’t get a credit card if you aren’t working.
Good luck kids! Better to spend now and overextend yourself earlier rather than when you’re making money in a full-time job. More painful later in life!
The Discover Student Card and Citi mtvU are a close first a second, one thing I love about the student card is that it’s reward system is the same as the More card, so you’re really getting all of the benefits of Discovers premiere card, but obviously the APR is a bit higher because it is a student card, the student has an APR of 14.99% where as the More cards APR is 11.99%.
@Eric and CreditShout
I’ve always had good experiences with Citi cards. For those less familiar with the Citi Forward card — it just got introduced in the past year, and aims to reward its cardholders for good behavior. So in that sense, this card is “unique”.
@Financial Samurai,
Yes, credit cards for kids is a debatable issue, but exposure to this has to start somewhere (at the very least, for the education). I received my first card in my early 20’s without the benefit of some “guidelines” except for one: do not use your card unless you know you can pay it off completely every month. And this piece of advice just stuck. I’ve never wavered because I always equated card use with cash use.
If you imagine more cash flowing out whenever you pull your card out at a cash register (than if you simply used cash), maybe it will deter you from using the credit card as often.
@SVB – Yep, I agree. I don’t necessarily think it’s bad to expose young folks to the allure of credit cards early. It really is better to mess around and have some slip ups before things get out of hand.
When I say “don’t get until you work”, I mean working during college. As soon as you start working during college, you recognize the value of money more (b/c $8-9/hr is kinda painful), and you won’t go overboard in CC spending.
I have the Discover card, not sure if it’s the student one or the “Open Road” one – but I use it strictly for gas/auto repairs. I’m able to pay it off in full each month, and it’s really worked out great when my transmission went out last month and not everything was covered by insurance
Regardless, I’d recommend that one for anyone looking for an introductory credit card to start to build their line of credit.
Just my two cents: If you get a CC, use it for one or two routine purchases and that’s IT. i.e. gas, groceries, etc.
@ Financial Samurai
You make a great point in that some well meaning parents simply pay off all of their kids’ credit card bills which although it is beneficial in that it helps them build credit history, it is disastrous in teaching the kids how to manage credit responsibly.
Citi was my first credit card as a college student, and I had no complaints. Fortunately, I didn’t get into debt problems, and it allowed me to build by credit history early on. Financial Samurai’s suggestion to only get a card if you have a job is a great tip. It was my job in college that kept my debt under control.
Credit cards for students have been used by lots of young adults to build credit score. However they should learn how to manage their accounts and should limit their use of it to avoid big debt problems in the future.
New laws affecting the credit card industry my soon make getting a credit card as a student a thing of the past. New laws will require the student to have a job or a parents co-signature to apply for a credit card. The best option will be going with a pre-paid credit card such as the Mango MasterCard that has no fees with a monthly deposit. These types of cards will allow students to still have the benefits of a credit card for online purchases, gas, food, etc. while parents have the ability to re-load the card, watch their students spending and help teach the student money management and responsible spending without the huge interest fees and other drawbacks of a traditional credit card for students.