As the end of the school year nears, the excitement of going off to college is building for many high school seniors. One of the most exciting things for these incoming freshmen is the independence that college will bring: no curfew, no parents and no easy access to parent’s wallet when they need some extra money. Before this class heads off on their own, it’s important to discuss finances with them and make sure they have a good understanding of how to be responsible with money, One option to help students cover the high price of books, computers and various other expenses is to get them a credit card.
An important point to note for parents thinking about getting their student a personal credit card is that the 2009 CARD Act has limited the availability of credit for those under 21. For someone who is under 21 and would like a card, they must either prove that they have a steady salary to pay off any debt incurred or have a parent or guardian co-sign for the card. The latter option is going to suit the needs of most students. However, parents must be careful when co-signing for a card because that means they are linking their credit to this card. Parents will be responsible for any debt incurred and their credit score will be affected if the student defaults.
For parents who have discussed credit cards and responsible spending with their students, then a credit card is a valid option. With so many different student credit cards out there, it is important to shop around to find the best fit. One tool to help with the decision is BillShrink.com, which offers a credit card comparison tool that allows students find the best card based upon their spending habits.
To help students get started, here are the top student credit cards out there:
This card has no annual fee and is designed to help students learn and build their credit. It offers text and email alerts to help keep spending and bill payments on track and even offers a bonus for paying the bill on time. This card will also earn 1% cash back on all purchases. However, this card is not meant to carry a balance month to month and has a high APR of 19.8% and a low credit limit.
This card has no annual fee and is focused on rewarding students for being students. This card allows cardholders to earn one ThankYou point for every dollar spent and five ThankYou points for every dollar spent at restaurants, bookstores, record stores and movie theaters. Students can also get bonus ThankYou points twice a year for maintaining a good GPA. This card is also a bit better for students if they will be making a lot of purchases in the first seven months because it offers 0% APR. After the introductory period, the APR will range from 13.99-21.99%.
Like the others, this card also has no annual fee, but the rewards program is a bit more complicated. In general, this card earns .25% cash back. However, the card rotates through different categories quarterly and those “bonus” categories earn 5% cash back. While the 5% is the best of these cards, it is important to mark your calendar for when the bonus categories start. Similar to the Citi card, this card has a 0% introductory APR for the first nine months; after which it will be between 13.99-20.99%.
Getting a student credit card is a great way to build credit history and learning how to manage a budget. However, it is not a necessity for students. We encourage parents to consider whether their students are ready for the responsibility and consider waiting until they are sophomores and better adjusted to living on their own.