Student credit card requirements are tighter today. Gone are the days of enterprising upperclassmen offering free Frisbees to freshmen who applied for a student credit card on the first day of college.
That’s actually a good thing. But it doesn’t mean you should give up on applying for a student credit card.
Banks now take a more tactful approach to marketing student credit cards and student credit card requirements. (The government demands it, in fact.) And young adults today are more conservative with credit, too—as many as two out of three adults between 18 and 29 do not have a single credit card, according to a May 2016 study by Bankrate.com.
In my opinion, they’re missing out.
Why should you get a student credit card?
Used responsibly, a student credit card can help you build credit while giving you cash back on daily purchases.
As I’ve argued before, I think going without a credit card can be a mistake for many. You’ll have to trust that I’m not just saying that because Money Under 30 has advertising partnerships with credit card companies, but because I honestly believe responsible adults are missing out on the rewards, protections, and the credit-building power that using a credit card correctly can deliver.
When it comes to building credit, starting young is better—as long as you take baby steps and don’t treat your first credit card(s) as free money to be spent. It can take seven years to develop a credit score that’s considered “excellent”. That means someone who starts at age 18 or 20 will be in a good place by age 27 to get a mortgage, for example.
Student credit cards are not for everyone, but if you’re a student and want a leg up on your credit and finances when you graduate, a student credit card will help you get there.
How are student credit cards different?
Student credit cards are simply credit cards that are marketed to students. They work exactly the same, but student cards carry lower credit limits and offer students an increased likelihood of approval.
As an example, let’s take the Chase Freedom® Student credit card—in my opinion one of the best student cards available right now – and compare it with one of Discover’s flagship cards, the Discover it® Cash Back.
Best of all, you earn valuable rewards with both cards. The Chase Freedom® Student credit card offers 1% cash back on all of your purchases, with no rotating categories. The Discover it® Cash Back, on the other hand offers 5% in bonus categories like gas, restaurants, and Amazon.com, on up to $1,500 in purchases every quarter you activate – plus unlimited 1% cash back on all other purchases. It will also match all of the cash back you earn during your first year automatically, as long as you’re a new cardmember.
In this comparison, the Chase Freedom® student credit card actually has one benefit the Discover it® Cash Back card does not—a $20 Good Standing Rewards after each account anniversary for up to five years.
Both cards have no annual fee, but interest rates are where the cards begins to diverge, and this is typical of most student credit cards.
Banks determine interest rates based on a borrower’s creditworthiness or perceived risk. Students have less credit history and are inherently riskier, so banks charge them a higher APR.
The Chase Freedom® Student credit card, however, offers a decent 17.24% Variable APR.
In general, student credit cards will come with lower credit limits than other consumer cards.
Banks determine a card’s credit limit on an individual basis based upon your credit score, income, monthly expenses, and existing debt levels. Unless you’ve already established good credit and have a full-time income, you can expect a student credit card to come with a modest credit limit to start. And that’s a good thing, because if you find that it’s more difficult to mange your newfound credit than you thought, you can’t run up too high of a balance.
Student credit card requirements: How to get approved for a student credit card
It’s much easier to get approved for a student credit card than other cards, but student credit cards still have minimum approval requirements.
Even if you have little or no prior credit history, a low or no FICO score, and you’ve been denied for regular credit cards, you may be able to get approved for a student credit card if:
- You are, in fact, a student over the age of 18
- You’re a US citizen or resident with a Social Security Number
- You have some documentable income (a part-time job is fine)
- You don’t have bad credit already
If you’ve already made some credit mistakes, don’t expect a student card to approve you. Otherwise, if you’re a student with at least a part-time job, you may qualify for a student card when you wouldn’t qualify for other credit card offers.
Can you upgrade a student credit card when you graduate?
Yes. If you use your card responsibly and pay your card every month on time, banks will absolutely upgrade your account to a regular credit card.
Even before you graduate, many banks will automatically give you a chance to increase your credit limit after three to 12 months of responsible use. If they don’t, you can easily call and ask.
The same goes for upgrading your account after you graduate. Some banks will upgrade your card automatically, others will gladly do it when you ask (as long as you’ve been paying on time and aren’t dangerously close to your credit limit).
Student credit cards really aren’t that different from other cards. You’ll find student cards that offer great cash rewards and and the ability to build a positive credit history.
Student credit cards offer a higher chance of approval to students with verifiable income but also come with lower credit lines and higher interest rates.