Student Credit Cards 101: The Basics of Credit Cards for College Students

For many people, going to college is also the first time they'll be introduced to the world of credit, including credit cards. Find out the essentials of how credit cards work and how to manage credit card debt.

Student Credit Cards 101: The Basics of Credit Cards for College Students
Nathana Rebouças

In today's money-happy society, getting a credit card has almost become a rite of passage. Many young Americans may get their first credit card — in their own name — upon going to college (although, of course, there are those who get their own credit cards younger than this).

However, before you commit to that plastic gold mine, memorize a 16-digit number, and buy a new laptop with all the trimmings courtesy of Visa, there are a few things to keep in mind that will help you turn credit to your advantage and save you some unwanted surprises. 

Read on to learn about the essentials of credit cards for college students.

Table of Contents

Why Do You Need a Credit Card?

There are a variety of reasons why you might need a credit card and many advantages of credit cards when you have one. Here are some of the top-level reasons for why you should think about having a credit card:

  • Emergencies: Credit cards are a necessity for dealing with the unexpected. Blow a tire on a road trip through Nebraska? Have a family emergency and need airfare money? Credit cards can get you out of a tight spot when you don't have the cash you need. 

  • Build credit history: In the long term, good credit is a necessity. Years from now, as hard as it may be to imagine, you might want to buy a home. For that, you're going to need at least three forms of credit, usually two credit cards and an auto loan in good standing. Charging responsibly now using your credit card and incurring and paying off balances will help build your credit history. Be mindful of building your history and how credit scores work: Credit reporting companies, such as VantageScore 3.0 and 4.0, rate your credit record on a scale of 300 (very bad) to 850 (very good). Anytime you are late on a loan or credit payment, your credit score can take a hit. In the short term, even one late payment could cause banks to deny you a loan, so financial discipline is essential.

  • Flexibility: Having a credit card enables greater flexibility in how you can pay for goods or services. For example, if something you’re eyeing to purchase takes only cash or a debit card, having a credit card allows you to buy other products that take credit while saving your cash for ones that require only cash for the transaction. Credit cards can also be useful for covering short periods of time when you’re waiting on cash to be deposited in your bank account, so you’re not completely out of resources to make basic purchases.

  • Credit card rewards: While increasingly lately, banks have been offering rewards and discounts at retailers when using their bank-issued debit cards, credit cards still reign supreme when it comes to earning rewards points on purchases. Rewards credit cards allow you to rack up points on each one of your purchases (or on certain purchases, like gas, groceries, hotels, airfare, etc.), which you can then turn into a credit on your credit card balance or use directly to reduce the cost of a purchase in one of the categories the rewards credit card has designated.

What Makes One Credit Card Better Than Another?

Not all credit cards are created equal. It's important to check the fine print to see how some credit card offers differ from others. There are many options out there, so before you apply for a card, shop around. Three main factors you should consider when choosing a credit card include: 1) the rate of interest, referred to by credit card issuers as the annual percentage rate, or APR; 2) the credit card annual fee; and 3) the length of the grace period for payment.

1. Credit Card APR

The annual percentage rate, or APR, is the rate at which interest is accrued on the unpaid balance of your credit card. APR is one form of representing the interest rate you’re charged for using the credit card. Whereas the interest rate is the cost you pay for the privilege of borrowing money (in the form of credit), the APR calculates the percentage of the principal you will pay each year by taking into account factors such as fees and monthly payments you make. This is why often, when you visit a bank’s credit card webpage, you’ll see two columns: One for the nominal interest rate and one for the APR.

How credit card APR works

Credit card APRs are not as straightforward as multiplying the APR by your credit card balance. Instead, credit card APRs work on a daily basis because the interest on your purchases are compounded daily, not annually. The annual interest is the APR but the interest you’re charged is actually the sum of the daily interest charged to your average daily balance on your credit card.

So, for example, if your credit card APR is 23.24%, and you carry an average balance for the month (or however long the billing period is, typically 21 to 31 days) of $5,960.26, you'll rack up $113.84 in interest charges. 

How to calculate interest on credit card

So, how did we arrive at an interest charge of $113.84 on a monthly balance of $5,960.26? All it took is some mathematics.

Since credit card interest is compounded daily, you do not simply multiply $5,960.26 by 23.24%, because that percentage is the annual rate. Instead, you must divide 23.24% by 365 to get the daily interest rate (also called periodic interest rate or daily periodic rate) which in this case equals roughly 0.0637%, rounded to four decimal places. You then:

  • Multiply $5,960.26 (monthly balance subject to interest charges) by 0.0637% (daily interest rate)

  • This gives you $3.79

  • Then, multiply $3.79 by the number of days in your credit card billing period, in this case 30 days

  • Resulting in an estimated interest charge of $113.85 or $113.84, depending on if the credit card issuer rounds up or down to the second decimal point 

Naturally, you’ll want to look for a credit card with low APR so the interest charges on your credit card purchases won’t be too large. This means it’s essential to shop around and compare several credit cards in order to find the one with the best APR.

2. Credit Card Fees

Another critical factor when choosing a credit card are the fees that you are charged for having and using it. Most credit card companies charge a flat fee every year on your card, the aptly named annual fee. Some credit cards charge less than others do, so make sure to do your homework. Fortunately for college students, a vast number of student credit cards do not charge an annual fee. Popular credit cards for college students such as Discover it Student Chrome, Chase Freedom Student credit card, Capital One SavorOne Rewards for Students credit card, and Deserve EDU Mastercard for Students all do not charge an annual fee.

Other common credit card fees are balance transfer fees. A balance transfer is when you move the balance, or a portion of the balance, of one credit card to another credit card. Often people use balance transfers to take advantage of credit cards with 0% APR introductory periods, so that they can transfer the balance on their higher-interest credit card to the one with 0% APR and pay off the balance without any interest being charged. When you utilize a balance transfer, your credit card issuer typically charges you a percentage of the balance you’re transferring, hence the balance transfer fee.

Other credit card fees include a cash advance fee. These are often charged on the basis of a minimum dollar amount or a percentage of the cash advance, whichever is greater. For example, the Discover it Student Chrome card charges either $10 or 5% of the amount of each cash advance, whichever is greater. In addition, there are typically late payment fees and returned payment fees.

3. Credit Card Grace Period

The grace period is the period of time between the end of a billing cycle and the date your payment is due. During this period of time, you may not be charged interest as long as you pay your balance in full by the due date. Thus, if your credit card provides you with a grace period and you don’t carry a balance, then you can avoid paying interest charges on new purchases if you pay your balance in full by the due date.

If you do not pay your balance in full during your grace period, you’ll lose the benefits of the grace period, and you’ll be charged interest on the unpaid portion of the balance. Take note, however, that credit cards are not required to provide a grace period; it’s just that most credit cards tend to give you one.

Credit Card Rewards and Incentives

Some cards offer incentives for charging on their cards. Frequent flyer miles, store discounts, and cash back on purchases are just a few incentives that some cards offer. If you can find a card with extra perks, that's great. But don't let the incentives make the decision for you. Again, the most important things to look at are the APR, fees, and grace period. There are several websites that publish this information to help you compare various cards.

What Are the Best Credit Cards for College Students?

When it comes to the best credit cards for college students, there are plenty of credit cards to choose from. Some credit card companies issue credit cards specifically for students, while other credit cards merely work well for students when they have little to no credit history.

Here are some of the best credit cards for college students:

Credit Card

Purchase APR

Intro APR

Annual Fee

Late Payment Fee

Rewards

Capital One Platinum Secured Card

30.49%

None

$0  ($49, $99 or $200 minimum refundable deposit)

Up to $40

N/A

Capital One Quicksilver Rewards for Students

19.99% - 29.99%

None

$0

Up to $40

Earn unlimited 1.5% cash back on every purchase, every day. Earn 10% cash back on purchases on Uber and Uber Eats, plus get your Uber One monthly membership fee covered through November 14, 2024.

Capital One SavorOne Rewards for Students

19.99% - 29.99%

None

$0

Up to $40

Earn unlimited 3% cash back on dining, entertainment, popular streaming services and at grocery stores, plus 1% on all other purchases. Earn 8% cash back on Capital One Entertainment purchases. Earn 10% cash back on purchases on Uber and Uber Eats, plus get your Uber One monthly membership fee covered through November 14, 2024.

Chase Freedom Rise Credit Card

26.74%

None

$0

Up to $40

Earn 1.5% cash back on all purchases.

Navy Federal nRewards® Secured Credit Card

18.00%

None

$0 ($200 minimum security deposit)

Up to $20

1X points per dollar spent

Discover It® Secured Credit Card

27.99%

None

$0 ($200 minimum security deposit)

Up to $41

Earn 2% cash back at Gas Stations and Restaurants on up to $1,000 in combined purchases each quarter, automatically. Earn unlimited 1% cash back on all your other purchases automatically.

Discover It® Student Chrome

17.99% - 26.99%

0% for 6 months

$0

Up to $41

Earn 2% Cashback Bonus® at Gas Stations and Restaurants on up to $1,000 in combined purchases each quarter, automatically. Earn 1% cash back on all other purchases - at school, at home and everywhere in between.

Discover It® Student Cash Back

17.99% - 26.99%

0% for 6 months

$0

Up to $41

Earn 5% cash back on everyday purchases at different places each quarter like Amazon.com, grocery stores, restaurants, gas stations, up to the quarterly maximum when you activate. Plus, earn unlimited 1% cash back on all other purchases – automatically.

Truist Enjoy Cash Secured

24.24%

None

$19

Up to $40

Earn up to 3% cash back on gas, and 2% on utilities and groceries (with a combined $1,000 monthly cap)—and 1% on all other eligible purchases.

U.S. Bank Altitude® Go Secured Visa® Card

29.99%

None

$0 ($300 minimum security deposit)

Up to $41

4X points on dining, takeout and restaurant delivery. 2X points at grocery stores, grocery delivery, streaming services, gas stations and EV charging stations. 1X point on all other eligible purchases. Plus, a $15 credit for annual streaming service purchases such as Netflix and Spotify®.

U.S. Bank Cash+ Secured Visa® Card

29.99%

None

$0 ($300 minimum security deposit)

Up to $41

Up to 5% cash back on two categories you choose. 2% cash back on one everyday category. 1% cash back on all other eligible purchases.

U.S. Bank Secured Visa® Card

28.99%

None

$0 ($300 minimum security deposit)

Up to $41

N/A

These student credit cards all have different benefits going for them. Most of the secured credit cards — cards mainly aimed at building or rebuilding the user's credit — come with rewards programs, which, back in the day, was reserved only for higher-end credit cards. Additionally, with two of them — Discover It Student Chrome Card and Discover It Student Cash Back — you get a six-month period of 0% APR on purchases, so you won’t be charged interest on things you buy with the card within those six months, as long as you pay off the balance accrued in full before the end of the introductory period.

Where Can I Get the Best Deal on a Credit Card?

One great place to look when choosing a credit card is close to home, namely, your local bank. Most of those glitzy mail offers come from a handful of large, national banks. Typically, while the offers appear good at first, the interest you will actually pay over time is higher because introductory rates don't last (usually they last 6 to 18 months, but there are exceptions). 

A local bank will usually offer a good card with a fair rate that will not change. But as always, read the fine print. It may surprise you. While a card may say your monthly minimum payment is $20, the details will usually mention something like "or 3% of the bill, whichever is greater." You can wind up with a much higher monthly bill than you expected. In addition, you may find finance charges on your statement; some companies issue cards that begin charging interest shortly after a purchase, rather than giving a 25-day grace period to pay.

How to Get Credit Cards for College Students With No Credit

The best credit cards for college students are ones that ideally have low APRs, low or no annual fee, low balance transfer fees and penalty fees, offer a grace period, and offer credit card rewards or other incentives. However, getting your hands on the best credit cards for college students isn’t a simple straightforward step of applying for one.

There’s a frustrating catch-22 when it comes to getting your first credit card, including a student credit card. In order to be approved for a credit card, you need to have some credit history in your credit profile. If you’re young and have had your parents pay for most of your things in life thus far, not to mention you’ve used cash or your debit card for purchases, then it’s very likely that you won’t have enough credit history to qualify for a credit card; this is called having a “thin file” in terms of your credit history. Luckily, there are ways around this catch-22 as a young prospective credit card applicant.

Secured Credit Cards

One strategy for how to get a credit card with no credit is to apply for what’s called a secured credit card. The way secured credit cards work is that you must put down a deposit of money, known as a security deposit, which the credit card issuer will hold as collateral. The collateral is necessary as a guarantee for the credit card lender against you running up too many charges on the credit and can’t repay, so they can get their money back if you can’t pay your balance. 

Because secured credit cards require a deposit and are meant for users with little to no credit history, they tend to have low initial credit lines; often, these credit lines are equal to the initial deposit you put down. However, if you use the secured credit card responsibly and make payments on time, eventually your initial credit line can be increased. Your credit line can also be increased by adding additional funds to the underlying collateral deposit. And all the while you use your secured credit card responsibly, you are building up your credit history.

Student Credit Cards

Not surprisingly, some of the best credit cards for college students with no credit are the specific student credit cards companies offer to college students. Depending on the credit card issuer and the product, you might not need a long credit history or high credit scores to qualify for a student credit card. Since these student credit card issuers know their product is geared for younger Americans, they are aware that applicants may likely not have a thick credit profile.

Student credit cards typically have lower initial credit lines than other standard credit cards, but they still offer a viable option for college students with no credit history to own their own credit card and build their credit profile through responsible spending and repayment.

Credit Cards with a Co-Signer

If you’re unable to qualify for a credit card on your own, which is common, you may be able to qualify for it when you apply with a co-signer. Unfortunately, not as many credit card issuers nowadays allow co-signers, though there still are credit cards out there that allow this.

If you pursue this strategy and find a credit card issuer that allows co-signers, it’s important to note some critical features that come with the territory. First, the co-signer will be responsible for paying back your debt if you do not or cannot. Second, the co-signer may be responsible for any late fees or collection costs that you incur. As a result, negative events, like late payments or returned payments, could become part of the co-signer’s own credit history as well as yours. Still, if you use your credit card responsibly by promptly paying on time, especially above the minimum payment, a co-signer credit card can be an invaluable way to help college students with little to no credit build their credit history.

The Bottom Line on Credit Card 101 for College Students

Student credit cards serve as a practical tool for college students, offering an early opportunity to build credit history, learn responsible financial habits, and navigate the complexities of personal finance. While they come with their own set of potential pitfalls, such as high interest rates and the risk of accruing debt, mindful and strategic usage can yield significant advantages.

The key lies in understanding the fundamentals of credit card use, including regular payments, staying within the credit limit, and being aware of associated fees and charges. By taking these steps, college students can set the stage for a future of financial stability and sound credit, making student credit cards a foundational block in the journey towards financial literacy and independence.

Andrew DePietro

Author: Andrew DePietro

Senior Researcher, and Content Strategist

Andrew DePietro is a finance writer covering topics such as entrepreneurship, investing, real estate and college for BrokeScholar, Forbes, CreditKarma, and more.