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Finances

Is Your Student Ready for a Credit Card?

Erica Sandberg


Not all college students are ready for a credit card, but it can give them (and you) peace of mind, especially if their campus is far from home.

When you determine that they are ready, it’s important to help them select the right card and then manage their new account properly.

There are a dizzying number of credit cards on the market, so reviewing them all before making a decision is not practical. The simplest way for your student to start a search for the right card? Refine the options to the most attractive accounts that are truly within their reach, then identify the best one from that shallow pool.

First, know that all credit card issuers require an applicant to be at least 18 years of age and possess enough of an independent income to cover the payments. That money can come from any combination of job earnings, a verifiable cash stipend, government assistance (not loans), and grants and scholarships.

Issuers will also check your student’s credit reports and scores to determine lending risk, even if they've never had a credit card before.

With that in mind, here are the credit card types to zero in on if your student has…

No credit history and some savings.

In this case, a secured credit card would be ideal. Many financial institutions offer credit cards that are guaranteed with cash to act as collateral against the credit line.

In most cases the line exactly matches the deposit, which can be as low as a couple of hundred dollars. If your student accumulates a debt but doesn’t make the payments so defaults, the issuer can dip into the cash held in deposit and take the money that is owed.

Because the issuer assumes so little risk, these cards are the easiest for people who are just starting out to get. Some secured credit cards are designed for the student population, but not all are.

No credit history and no savings.

Not every student has enough spare cash to lock up into a secured credit card’s deposit account. In that event, an unsecured student credit card is an excellent alternative.

To be eligible, students typically need to submit proof that they’re enrolled in school, either full- or part-time. An established credit history is not necessary for qualification (though it certainly doesn’t hurt).

Since these cards carry greater risk for the lender, the credit lines for these accounts tend to be especially low. However, if your student treats the account well by charging often and maintaining a low or no balance, the issuer might raise the limit after a year or so.

Established and good credit history.

Maybe your student already has positive information appearing on their credit reports. It could come from a student or vehicle loan that is in good standing, or by being an authorized user on someone else’s well-managed credit card. In that case, an unsecured credit card that is developed for the general population might be within reach.

Have your student obtain their credit scores, either from FICO or VantageScores. These scores range from 300 to 850, with higher numbers being predictive of lower lending risk. If your student has a credit score in the high 600s, there should be a variety of perfectly fine cards credit from which to choose.

Excellent credit history, doesn’t need great rewards.

Conversely, some students have so much positive information listed on their credit reports that their scores are already high — in the mid-700s on up to the top of 850. In such a scenario, they could be eligible for premium credit cards.

These products may not have an annual fee and come with some valuable perks. For example, they may have sign-on bonus points of 30,000 or more, which would be enough to cover the cost of a round trip domestic flight! The ability to rack up a more points that translate into cash back and other goods and services is also embedded in these credit cards.

Once your student has identified four or five credit cards that meet all the criteria, it’s time to read the details of each very carefully. Fees should be reasonable, and the interest rate ought to be as low as possible.

The issuer should have a good customer service rating, too. Have your student look at the issuer’s website to make sure it’s easy to navigate, with plenty of helpful information.

After all this, your student should select and apply for the single card that suits them the best. With the above strategy, they should be granted the right account without any trouble, and will be ready to charge ahead!

Erica Sandberg is a consumer finance expert and freelance journalist whose work appears in a wide variety of outlets including Bankrate, CreditCards.com, The San Francisco Chronicle and the National Education Association Member Benefits website. Erica hosts a podcast, Adventures With Money, and for 10 years has been resident personal finance authority for KRON-4 News in San Francisco. An updated edition of her indispensable book, Expecting Money: The Essential Financial Plan for New and Growing Families, is available now.

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