Credit Builder Credit Cards for Students: What You Need to Know

As a young adult in college, you might be getting your feet wet with creating a budget, tracking your monthly expenses, and making sure there's enough money at the end of the month. Besides basic money management, what's not to be overlooked is building credit early.

Building credit as a student is essential. For one, the benefits of credit are many. The more solid your credit, the easier time you'll have landing a car loan, mortgage, or other forms of financing with the most attractive terms and lowest rates. Plus, you might need good credit when applying to rent an apartment, open a utility line, or get on a payment plan for your cell phone.

A credit card can be a good way to establish a strong credit profile. By getting a student credit card you can be well on your way to establishing a strong financial foundation.

Here, we'll look at credit cards to build credit, how they can be a boon to students who are starting out their credit-building journey, and what features to look at when deciding what kind of student card to open:

Understanding Credit Cards to Build Credit for Students

Fun fact: The average credit score in the U.S. is 715, per data from Experian. The average credit score for Gen Z is 680. While young adults, as a whole, have credit in the "good" range, they tend to have lower scores because they are new to credit.

If used mindfully and responsibly – by not carrying too high a balance and making on-time payments – credit cards can be an accessible, simple way to build credit when you're young. Student credit cards might not require credit to apply, or they might have lower income and minimum credit score credit requirements. In turn, it might be easier to get approved for a card.

Additionally, the best student card cards feature benefits, such as generous cash-back rewards, a zero-percent APR introductory period, and no annual fee.

A credit card to build credit can be a secured credit card that can help you lift your credit score. This is especially true if you have no credit history or are rebuilding your score.

You can build credit responsibly by doing your homework on interest rates, and terms, and making on-time payments. Responsible use can lead to better credit scores and future financial opportunities.

Key Features to Look for in Student Credit Cards

Wading through the different options of student credit cards and cards that help build credit can feel overwhelming. To help you make sense of what's out there, here are the key features to consider when shopping around for a credit card:

More lenient credit requirements. Some student credit cards will have less stringent credit and financial requirements – such as lower credit score minimums. Credit card issuers understand that if you're just starting out you might not have much of a credit history. Some cards may not even do a hard pull of your credit.

Credit card companies will also look at your debt-to-income ratio (DTI), which is how much income is going toward your debt each month. Your DTI ratio is determined by taking your monthly debt payments and dividing it by your gross monthly payments. When you have a high DTI, you're seen as a higher risk to lenders.

Low fees. Fees can make having a credit card more expensive. The key is to understand these fees, what triggers them, and how to avoid them.

The lower the fees, the better. You can find a student credit card with no annual fees, which can help you save on the potential costs of opening a credit card. Besides the annual fee, look for the late payment fees, foreign transaction fees, returned payment fees, and over-the-limit fees. You can find this information by looking at a credit card's terms.

Reasonable interest rates. The average APR on student cards, as of September 2024, is 23.94%. While you'll likely find high interest rates on student cards, ideally, you'll want to find one with reasonable interest rates. Besides the purchase APR, you'll want to look at the cash advance APR, balance transfer APR, and introductory rate APR.

And if you go over your card limit, you might be hit with a penalty APR, which might be applied when you miss a payment. It's a higher APR that can be applied to future transactions you make on your card. If it's been 60 days and your account still isn't current, the card issuer can hit you with a penalty APR on your existing balance.

Rewards programs. Student credit card benefits might include the opportunity to earn cash-back rewards on purchases you make with the card. Simply put, a cash-back rewards program offers you a minor refund for your purchases. For instance, a 2% flat cash-back card gives you 2% back on every transaction you put on your card.

Other rewards might include a cash-back bonus if you spend X within the first several months of opening your credit card account.

Lower credit limits. It's true that a higher credit limit can lower your credit utilization ratio, which, in turn, can help your credit.

However, it might be a good idea to look for a credit card with a lower limit. That way, you won't be tempted to rack up a balance on your card. Because if you have a high balance, it could take you longer to pay off, which means you'll be paying more in interest.

If you do have a card with a lower credit limit, you'll want to be careful not to have a high balance. That's because a high balance will also increase your credit utilization ratio, which in turn can hurt your score. Many financial experts recommend you keep your credit usage to no more than 30% of your credit limit. Ideally, you'll want to keep your credit usage ratio under 10% – and consistently pay your bills on time. The key is to carry a low balance on your cards–or not have a balance at all.

Credit-builder tools. Credit cards typically report to the three credit bureaus – Experian, Equifax, and TransUnion. So if you stay on top of your payments by making at least the minimum monthly payment by the due date, credit cards could help build your score.

One thing to note is that your financial behavior on just a credit card may or not equate to a better credit score. That's because other variables, such as activity with other creditors, can impact your score.

Some credit cards catered toward students might feature additional credit-builder tools, like free credit monitoring and a free credit score. There might also be resources to help you learn about your credit behaviors.

Self.inc Cards: A Great Option for Students

Besides the standard student credit cards, another solid option for students is secured credit cards. If you have little-to-no credit history, the Self Visa® Credit Card is a secured credit card that enables you to elevate your credit and manage your day-to-day finances effectively.

No hard pull of your credit is required to apply, and your payments are reported to the three credit bureaus. When you're timely with your payments and keep a low balance on your card, it can help make a positive impact on two major credit factors that make up 65% of your credit score:'

• The amounts you owe (30% of your score)
• Your payment history (35% of your score)

To open a Self Visa® Credit Card, you'll need to first open a Self Credit Builder account, and meet the income and eligibility requirements. To be eligible for a Self Visa Credit Card, note that you'll need to check off three boxes: have $100 or more of savings progress in your Builder Account, add or update your income and expenses, and keep your account in good standing.

The built-up savings in your existing Self Credit Builder Account secures the Self Visa® Credit Card. You set your limit, and you can use the card anywhere Visa is accepted.

Tips for Using Student Credit Cards Wisely

Opening your first student credit card is a big step in the right direction. Credit-building tips for students include coupling opening a credit card with responsible use. Here's how to use your credit cards wisely:

Make on-time payments. Your payment history makes up the largest chunk of your score – 35%, to be exact. Making on-time payments will ensure you are slowly building your credit.

In a perfect world, you'll want to pay your card in full to avoid interest fees and keep a low balance. But you'll want to make at least the minimum monthly payments by the due date. If you're struggling with making on-time payments, to make it easier to stay on top of your payments, consider moving your credit card payment date. It depends on the issuer, but you can usually make this change by a few simple clicks on your card company's mobile app or dashboard.

Keep a low balance. Remember: Your credit usage contributes 30% to your score. A high credit usage can hurt your score. The lower your credit usage, the better.

Avoid unnecessary spending. Your credit card balance isn't a free pass to spend on whatever you want. Instead, only put purchases that you can afford to pay off in a reasonable amount of time. Or if you plan on putting a big-ticket purchase such as a laptop or vacation, see if you can save ahead of time for it, then pay off the card in full the following billing period.

Another way to steer clear of excessive purchases on your card is to only use your card to pay recurring bills like your cell phone plan or monthly streaming service subscription. Avoid putting other purchases on the card. Set up autopay on your bills, and pay the card off in full each month. That way, you know exactly how much you owe on your card each month, and your payments will remain manageable.

Monitor your credit. Some credit cards offer a free way to check your credit scores. Many card issuers offer free monthly credit score services and some offer free basic credit monitoring.

Another way you can check your credit is by ordering a free credit report at AnnualCreditReport.com. Currently, free weekly reports are available from each of the three bureaus. Aim to order and review your credit report at least once a year. This can help you understand how your spending habits can impact your credit.

Common Mistakes to Avoid with Student Credit Cards

We all can stumble with our credit card habits, especially when starting out. Knowing what they are and what you can do to prevent making these mistakes can put you in a more surefooted place. Here are some common pitfalls to avoid:

Overspending. Avoid thinking of credit cards as "free money." You will need to pay back the purchases you put on your card. Plus, if you carry a balance month-to-moth, you're on the hook for paying interest on those purchases.

To avoid spending too much on a card, start with a low balance. Consider only putting your bills, or one type of purchase on your card (i.e., gas for your car, rent, weekly groceries). Aim to pay off your balance in full each month.

Missing payments. Falling behind or missing payments altogether can damage your credit. To avoid missing payments, change your scheduled monthly date so it falls during a time of the month that's more in sync with your budget and cash flow. It can also be helpful to set alerts — either by phone, email, or both — letting you know when your next monthly payment is due and the amount.

Last, consider setting up autopay. The options to set up autopay typically include: paying the minimum balance, your full statement balance, or a custom amount. You can also set the payment date.

Applying for multiple credit cards. This could hurt your credit in several ways. First, when you apply for a credit card, it results in a hard pull of your credit. This typically can lower your score by a few points. And applying for multiple credit cards at the same time can have a larger negative impact on your score.

Not looking over your monthly statements. Reviewing your monthly credit card balances can help you spot instances where you were accidentally charged twice and identify unauthorized charges.

Plus, you can see when monthly subscriptions or your internet bill has gone up. It can also help you realize if you've started spending more than you'd like – or can – on clothing or eating out.

Make a point of checking your monthly statements to see if there are any mistakes or if expenses have changed.

How to Apply for a Student Credit Card

Let's go over steps that can help your chances of approval, and make for a smooth application process:

Shop around. You don't need to apply for the first pre-approved offer you get in the mail. Do your homework and see what kind of student credit cards and secured cards that build credit are out there for you. Think about what features are most important to you – low or no fees, some opportunities to earn cash back, or maybe no foreign transaction fees if you plan on traveling with the card.

Plus, you'll want to know what the minimum credit score and other financial requirements are to get approved for a card.

Check your score. Even if you're just starting out, ordering a credit report and seeing where you stand is a good idea. You can think of getting a read on your report as a barometer of where you're currently at.

You don't usually get your credit score with your report – there might be an additional cost–but you can check your score from a credit monitoring service. Your bank might also offer a free credit score that's usually updated monthly. From there, you can take steps to build your score.

Get pre approved. Some credit cards let you get pre approved for a card, which lets you know the credit limit, rates and terms you'll likely be approved for. As part of the pre approval process, most credit card companies will do a soft pull of your credit, which won't impact your score in the slightest.

Gather your documents and information. Having your documents in tow when you apply can make for a quicker process. Plus, it can minimize errors, which can hurt your odds of getting the green light on a card. Typically, you'll need to have a proof of identity, which can include:

• Driver's License or State ID
• Passport
• Social Security Number (SSN)

You'll also need to provide information such as the following:

• Name
• Date of birth
• Housing status
• Employment and income information
• Address
• Contact information

Have a source of income. The income requirements vary according to the credit card, and how old you are. If you're under 21, you'll need an independent source of income, and can usually only include certain types:

• Personal income from your job
• Income from self-employment, such as from freelancing and side hustles
• Money from scholarships, grants, and financial aid. This is after tuition, fees, and other college expenses are paid for.

Note: Funds from student loans don't count as income.

Frequently Asked Questions (FAQs)

-Can a student with no income get a credit card?

Credit card issuers have different income requirements. While the minimum income requirements are not normally advertised, you will need income to get approved for a card.

If you're under 21, you'll need an independent source of income. Plus, card issuers must get financial information that indicates those under 21 have the independent means to make the minimum periodic payment on their debt that's based on the terms and conditions of the card.

-What credit score do you need for a student credit card?

The credit score varies, according to the credit card company and the issuer. However, as these are made for students with no or limited credit scores, some student credit cards might not require a credit score to apply.

-Can a full-time college student get a credit card?

Yes, there are a handful of credit cards that are designed for students. Further, a secured credit card with low credit score requirements and more lenient criteria to get approved, is available for full-time college students.

-What is a typical credit card limit for college students?

While there's no universal minimum credit card limit for college students, a student credit card may have a $1,000 credit limit. Some may have a $500 credit limit.

Conclusion: Start Building Your Credit Today

Building credit as a student can provide a solid foundation for financial success. Responsible use of your card – by making on-time payments, keeping a low balance, regularly monitoring your credit, can lift your score.
Student credit cards and secured cards can be a simple way to elevate your score. Plus, you can enjoy additional perks such as credit-building tools and cash-back rewards. By shopping around and understanding their ins and outs, you can find a credit card that is a good fit for you.

About the author

A personal finance writer for over 8 years, Jackie Lam covers money management, lending, insurance, investing, and banking, and personal stories. An AFC® accredited financial coach, she is passionate about helping freelance creatives design money systems on irregular income, gain greater awareness of their money narratives, and overcome mental and emotional blocks.

Her work has appeared in publications such as Bankrate, Time's NextAdvisor, CNET, Forbes, Salon.com, and BuzzFeed. She is the 2022 recipient of Money Management International's Financial Literacy and Education in Communities (FLEC) Award, and a two-time Plutus Awards nominee for Best Freelancer in Personal Finance Media. She lives in Los Angeles where she spends her free time swimming, drumming, and daydreaming about stickers.

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