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Heading off to college is the beginning of a life full of independence for many young adults. Setting your own hours, deciding what to eat and making purchases with your own credit card. However, many students are just starting to establish their credit and may not qualify for the credit cards that require good to excellent credit.
Fortunately, there are options. For those with absolutely no credit or a history of poor credit, there are secured credit cards to help get you started on the road to good credit or back on the path to re-establishing your credit. Many student credit cards are designed directly for college students and have features such as no annual fee.
Secured versus Unsecured Credit Cards
Credit card applicants with poor or no credit who might otherwise be denied for an unsecured credit card, can opt for a secured credit card. This is a credit card where you give the lender a deposit to hold on to, as a kind of insurance that you will be responsible with the credit card; making regular monthly payments and demonstrating that you are worthy of credit. The deposit required is typically equal to the amount of your credit limit, ensuring any money you spend is covered by the deposited amount. Secured card lenders will report credit card activity to the leading credit bureaus and over time with responsible spending and consistent on-time monthly payments (generally a year or so) your FICO® credit score with grow.
Once you’ve shown a consistent pattern of responsible behavior and your FICO® credit score climbs to somewhere between 580-670, you will be among those with “Fair” credit. Those with fair credit have more credit card options, including eligibility for unsecured credit cards. These unsecured credit cards do not require a deposit, meaning the lender will trust you with their money. That said, you might have to pay a higher variable interest rate or have fewer card benefits than those for people with good to excellent credit.
That’s ok though, you are on your way to building your credit and in time you can grow your credit score even more. Once you find your FICO® credit score at 680 (typically considered good credit), you will have even more credit card options available to you, with more benefits and rewards programs to choose from. Then after time, should you get to excellent credit, you will get to decide what you want and what works best for your needs as the credit card lenders will be vying for you to choose them.
More >>> How to Build Credit in College
Mistakes to Avoid When Building Credit
Some common mistakes to avoid when building your credit are applying for too many cards, maxing out your cards and missing or making late payments.
Applying for Too Many Credit Cards
Did you know that each time you apply for a credit card it can negatively impact your credit score? When you submit a credit application the lender will want to review your credit history and understand your current debt situation to determine if lending you money in the form of a credit card is a good idea. This can cause your credit score to go a down a few points. If you apply for multiple cards this can happen multiple times and the aggregate point drop could be substantial. You should only apply for cards you truly want and only those you really need.
Maxing Out Your Credit
When those lenders check your credit to see how much debt you currently have, they will also be looking at how much debt you potentially have (available credit vs. credit limit). This means, they will look at your credit usage, how much of your available credit you have used versus what the maximum credit limits are on your open accounts. If you have used all your available credit (i.e., you maxed out your current credit cards) there’s a good chance a lender will not want to give you more money, as it appears that you are not very good at managing your money well.
Additionally, this usage factor impacts your current credit score. Ideally your credit utilization will be 30% or less. This means that if you have $1,000 of available credit amongst all your accounts, you will want to use only $300 of it, anything more equates to a higher utilization rate and a potentially lower FICO® credit score.
Missing or Making Late Payments
Probably the most important thing you can do to grow your FICO® credit score is to make consistent on-time monthly payments, paying at least the minimum amount due, but more would be best if you can afford it. When you make late payments or miss payments altogether these will get reported to the credit bureaus and will negatively affect your FICO® credit score. Always ensure you can make the minimum monthly payment when it’s it due, when working to establish a strong credit history.
If you are ready to start spending responsibly, we’ve got some recommendations for you for prospective credit cards for students with fair credit. Here are our picks for best student credit cards.
Capital One® Platinum Secured Credit Card
Why We Like It:
- No Annual Fee
- Cardholders are eligible for a credit line increase in as little as 6-months for consistently paying on time
Important to Consider:
- Variable APR of 26.49%
Product Details:
The easy to use Capital One Platinum Credit Card is a great way to help you build your credit when used responsibly. If you have a fair or limited credit score, you are likely to still be eligible for a Capital One Platinum Credit Card. In six-months' time, eligible cardholders will be automatically considered for a higher credit line. The Capital One Platinum Credit Card has no annual fee or foreign transaction fee. Cardholders can easily request emergency card replacement. If credit card fraud occurs, fraud coverage is accessible. With the Capital One Platinum Credit Card, users receive account alerts from Eno, the Capital One assistant.
There is no rewards program available with the Capital One Platinum Credit Card. This is unlike the Capital One QuicksilverOne Cash Rewards Credit Card, which is available to consumers with the same credit range. Cardholders also do not receive any notable perks. While this may not be very important to users if the number one priority is building credit, it is still an important factor to consider. The Capital One Platinum Credit Card comes with tap-to-pay technology that can be used for quick in-store purchases. Users can enroll in autopay, meaning that their credit card payment is made automatically each month and decreases the opportunity for any late fees to arise.
This card can be a good choice for users with the number one goal of building credit. Fee-averse users who want to build credit and work on increasing their credit score will be satisfied with this card, but those who prioritize credit card rewards may not feel as satisfied.
Capital One® QuicksilverOne® Cash Rewards Credit Card
Why We Like It:
- 1.5% cash back on eligible everyday purchases at stores, restaurants and gas stations
Important to Consider:
- $39 Annual Fee
- Variable APR of 26.49%
Product Details:
The Capital One QuicksilverOne Cash Rewards Credit Card is primarily used by cardholders who prioritize cash back rewards. With the Capital One QuicksilverOne Cash Rewards Credit Card, 1.5% cash back is earned on each and every purchase. Credit card users also have access to many benefits including emergency card services, fraud alerts and coverage, as well as protections to decrease the likelihood of identity theft.
Petal®2 Cash Back No-Fees Visa
Why We Like It:
- No Annual Fee
- 1% cash back on everyday purchases right away; 1.5% cash back after 12-months
Important to Consider:
- Variable APR between 17.24% to 31.24%
Product Details:
The Petal 2 Cash Back No Fees Visa Credit Card is available to those eligible in the range of limited to great credit. The credit card does not require a security deposit. Also, the Petal 2 Cash Back No Fees Visa Credit Card reports activity to the top three credit bureaus. The range for the Petal 2 Cash Back No Fees Visa Credit Card limit is very wide, from $300 to $10,000.
Card users can earn 1% cash back on purchases that are eligible. If the cardholder makes a minimum of 12 payments on time, the cash back percentage will increase to 1.5%. In certain scenarios, users can earn anything from 2% to 10% cash back on purchases through participating merchants. The Petal 2 Cash Back No Fees Visa Credit Card is issued by WebBank. WebBank is a member bank of the Federal Deposit Insurance Corporation.
Cardholders also have access to fraud protection, as well as Experian credit score monitoring. A Petal 2 Cash Back No Fees Visa Credit Card can be frozen by the cardholder at any time.
Journey Student Rewards from Capital One®
Why We Like It:
- No Annual Fee
- Earns 1% cash back plus an additional .25% cash back with on-time payments.
Important to Consider:
- Variable APR of 26.49%
Product Details:
The Journey Student Credit Card From Capital One allows students to have the opportunity to build their credit through responsible use and also allows them to earn cash back rewards for certain purchases. The credit card offers an unlimited 1% cash back on every purchase, but there is an opportunity to increase cash back rewards to 1.25% each month as long as credit card payments are made on time.
The Journey Student Credit Card from Capital One does not have an annual fee and also there are no foreign transaction fees associated with the credit card. Cardholders using the Journey Student Rewards Credit Card from Capital One have access to certain protections such as fraud coverage. They can also receive text alerts and email reminders that keep them in the know about their credit card activity.The Journey Student Credit Card from Capital One has benefits that can help students such as emergency card services as well as fraud coverage and protection. Late fees can occur and are typically $40.
Petal®1 No Annual Fee Visa®
Why We Like It:
- No Annual Fee
- Cardholders are eligible for a credit line increase in 6-months with history of on-time payments
Important to Consider:
- Variable APR between 24.24% to 33.74%
Product Details:
The Petal 1 No Annual Fee Visa Credit Card is available to applicants ranging from those with little to no credit all the way to those with fair credit. The credit limit for this card is $300 to $5,000 and no security deposit is required. Cardholders can earn anything from 2% to 10% cash back on eligible purchases from certain merchants. The credit card reports activity to all three major credit bureaus. Petal 1 Credit Card is issued by WebBank. WebBank is a member bank of the Federal Deposit Insurance Corporation.
Discover IT® Student Cash Back Credit Card
Why We Like It:
- No Annual Fee
- Up to 5% cash back on eligible purchases
Important to Consider:
- Variable APR between 15.99% to 24.99%
Product Details:
The Discover IT Student Cash Back Credit Card is designed with students in mind. This card is a good fit for students that want to earn cash back rewards while continuing to build their credit. The Discover IT Student Cash Back Credit Card earns 5% cash back on everyday purchases, for example buying products on Amazon.com, grocery stores, restaurants, gas stations, and so on. Also, cardholders can earn cash back when you pay using PayPal. Additionally, the credit card earns users unlimited 1% cash back on all other purchases. Discover will match dollar-for-dollar the cash back you've earned at the end of your first year as a Discover cardholder.
This student credit card is a good one for those who are building credit, and those who want to earn rewards as well. The downside is that cardholders have to wait 12 months for Discover's cash back match be applied.
Discover IT® Student Chrome Credit Card
Why We Like It:
- No Annual Fee
- Up to 2% cash back on eligible purchases up to $1,000 each quarter
Important to Consider:
- Variable APR between 15.99% to 24.99%
Product Details:
The Discover IT Student Chrome credit card is a great choice for any student looking for the chance to build their credit history while also earning rewards and cash back at gas stations and restaurants. The credit card earns 2% cash back on the first $1,000 spent by the cardholder. The Discover IT Student Chrome credit card can be a good fit for students since there is no annual fee and no late fee on first late payment. But it is important to note that this credit card may not be the best fit for students that want or need a credit card with higher earning potential and other benefits.
Credit One® Bank Platinum Visa®
Why we like it:
- Earn unlimited 1% cash back on eligible purchases
Important to consider:
- $75 Annual Fee for the first year and $99 each year thereafter
- Variable APR of 26.99%
Product Details:
Those with good to excellent credit are eligible to apply for the Credit One Bank Platinum Rewards Visa Credit Card without the worry of any annual fee. This credit card initially offers a $300 credit line. Cardholders will earn 2% cash back on qualifying gas and grocery purchases, they can also earn cash back on select telecommunication services. Some benefits that are available to cardholders include free Experian credit score access and zero fraud liability coverage.
Avant® Credit Card
Why We Like It:
- No frills credit card designed to help build or establish credit
Important to Consider:
- $0 to $59 Annual Fee (fee varies due to different offers provided)
- Variable APR between 27.99% to 29.99%
Product Details:
The Avant Credit Card is an unsecured credit card. This credit card is designed for a cardholder with a fair or average credit score, or a limited credit history. While the Avant Credit Card requires no deposit and can help you build credit as long as it is being used responsibly, there are not many other benefits that cardholders have.