Student rates

Empowering Purchasing: The Student’s Guide to Building Credit

Credit – like adulthood – can be a daunting subject to discuss, but first you need to start with a credit card. Whether you’re applying for a car loan or just doing your weekly grocery shopping, using a credit card can both protect your finances and bring you one step closer to feeling like an “adult.”

With great power comes great responsibility, and the purchasing power contained in such a small piece of plastic provides the perfect representation of this principle. Unlike that debit card from your first student checking account, a credit card can let you earn rewards just for traveling, get frequent cash back benefits, and use flexible spending limits. So establishing money management skills and knowing the risk of credit card debt are just two of the ways a young college student can become more responsible with their credit.

So what is credit? Maybe you’re working on renting your first off-campus apartment, or you’re leaving the city life of Philadelphia behind and need access to a car. Either way, having good credit will make it easier to reach those big milestones in life. In effect, a credit score basically tells a bank whether you are responsible enough not to borrow more money than you can repay and that you will repay the money lent to you on time.

You may be wondering: how can the bank know if I am responsible or not? This is done by monitoring your credit history. Your individual account includes the length of your history (the earlier you start, the better!), the different types of credit you use, the amount you currently owe, and your previous payments.

Having a complete record that illustrates your reliability as an individual will make all the difference in applying for any type of loan. General guidelines for credit scores are: 850-720 is excellent, 719-690 is good, 689-630 is acceptable, and anything below 629 is poor.

While these may look like numbers to you, they tell your lender what kind of person you are at a glance. So you want that first impression to count. The difference between someone with a score of 620 and a score of 760 may not seem significant. However, the respective interest rates given to a person with a 620 versus a 760, can vary considerably.

Consider mortgages for a second. If you have bad credit, you will be expected to pay more to borrow the money you need. This is reflected in the APR (annual percentage rate) of a loan. Getting a good APR can mean you pay hundreds less on your loan each month, with savings totaling tens of thousands of dollars if you consider a 30-year mortgage.

Enough of the fine print. Of course, we’ve all heard the horror stories of teenagers misusing their credit card as a ticket for a shopping spree. However, the fact is that if you were looking for ways to improve your credit as a young adult, you already understand the seriousness of getting a good credit score. And chances are you’re not going to exhibit the careless behavior that banks and credit unions look for.

Now that the importance of credit in your adult life is established, let’s take a look at which student-friendly credit card is right for you.

Discover Student Cash Back

Reward rate: 1% to 5% (5% only applies to qualifying purchases)

Introductory APR: 0% (6 months)

Regular APR: 15.24% – 24.24%

Advantages:

  • Absolutely no fees, including annual and foreign transaction fees
  • No penalty the first time you pay late
  • The issuer will match the cashback you earned in your first year of use

The inconvenients:

  • 5% Cash Back is only available for purchases from pre-selected rotating categories which can be difficult to track
  • Does not offer the benefit of purchase or travel protection

Check it out Student Chrome

Reward rate: 1% to 2%

Introductory APR: 0% (6 months)

Regular APR: 15.24% – 24.24%

Advantages:

  • Unlimited dollar-for-dollar cash back in your first year
  • An established credit score is not required
  • No penalty the first time you pay late
  • 0% intro APR for the first six months

The inconvenients:

– Less likely to be accepted overseas, so if you are planning to travel overseas, this is definitely a factor to consider.

Capital One Quicksilver Student Cash Rewards Credit Card

Reward rate: 1.5% to 8%

Intro APR: N/A

Regular APR: 16.49% – 26.49%

Advantages:

  • No foreign transaction fees, combined with travel and purchase protections, make this a great starter card if traveling is your priority.
  • Equal rewards to a standard Capital One credit card, minus the need for extensive credit history
  • Above average cash back rate

The inconvenients:

  • Although the card has a variable APR range, the upper limit of 26.49% can make it more difficult to pay off a remaining balance
  • Does not offer 0% APR introductory rate

Capital One SavorOne Student Cash Rewards Credit Card

Reward rate: 1% to 8%

Introductory APR: 0%

Regular APR: 16.49% – 26.49%

Advantages

  • Excellent cash back rates for categories such as restaurants and entertainment
  • Minimal fees
  • Capital One will automatically consider the cardholder for a higher line of credit after six months of good credit building.
  • $100 cash welcome bonus if you spend $100 in the first three months

The inconvenients

  • Does not offer benefits specifically for students
  • Potential to have a high APR rate, similar to the Capital One Quicksilver credit card.

Visa Petal 2 “Cash Back, No Fee” Credit Card

Reward rate: 1% to 1.5%

Intro APR: N/A

Regular APR: 15.24% – 29.24%

Advantages:

  • An existing credit score is not required to apply
  • Absolutely no fees (annual fees, foreign transaction fees, late payment fees or returned payment fees)

The inconvenients

  • The reward structure provides the user with enhanced repayment rates after 6 and 12 respective monthly payments are submitted on time. This can be confusing for those just starting to build credit.
  • Balance transfers are not offered, so this card cannot be used to manage existing debt.
  • Like the Capital One Quicksilver credit card, the top end of the APR range is above most competitors

Whether you’re looking for high reward rates, travel perks, or low fees, there’s bound to be a credit card to suit your needs. So apply today, because when you’re both proactive and responsible, independence can provide incredible benefits.