Credit Cards for College Students: What Should You Be Looking For?
If you’re in school, you’re probably just learning about loans and credit. Many students opt to get a credit card to help pay for expenses and build their credit. There are dozens of options out there, so how do you choose which one to apply for?
Rates and What They Mean
The APR is the Annual Percentage Rate, and it is your interest rate for your credit card or loan expressed as a yearly rate. This value will give you a good idea of how much you’ll be paying if you don’t pay off your credit card balance in full each month. The APR of your potential student credit card can vary widely, depending both on the type of card you apply for and your credit worthiness. Some cards, such as the Wells Fargo Cash Back College Card have an APR as low as 12.65%, while some cards have an APR as high as 26.74%.
The U.S. 2020 Credit Card survey of college students showed that the majority of college students considered the interest rate as their primary concern when choosing a credit card, at 32.9%. This is especially a concern for college students that do not pay off their balance in full each month. According to the survey, only about 51% of students paid their balance each month, with about 9% paying less than the minimum or missing payments. It’s important when you decide to get a credit card that you use it properly, and paying off the balance is the best way to improve your credit score.
Credit Card Benefits
There are limited options for credit card benefits with credit cards for college students. The vast majority of cards do not have an annual fee, which many credit cards on the market charge each year. The main reward options for college student credit cards include cash back on purchases, usually at a rate of 1-2%. Others offer miles or points when you use your credit card, which may then be used for cash, payments on your credit card, travel, and even merchandise.
Many credit cards offer other forms of benefits that you should consider when you are choosing a card and learning about your potential cardholder benefits. Many cards will give you access to your FICO credit score each month. They may offer roadside assistance, travel insurance, or even rental car collision damage waivers. Many cards will offer zero liability for fraudulent transactions with the card, and some may even extend your warranty protection on items that you buy with your credit card.
What Sort of Limit Will I Have?
Credit cards for college students typically have lower limits than some other credit cards. In the Spring of 2016, the average credit limit according to the Student Monitor was $1,315, which you can compare to credit cards that offer limits of over $20,000 when you have an established credit history. For students with a limited credit history or a poor credit history, the credit limit may be under $1,000. This can be increased over time when you maintain a positive credit history, by using your credit card but paying off the balance in full every month.
Choosing a credit card is an important decision that can affect you for years to come. Find a credit card that offers the best benefits for you. For example, if you plan to do a lot of traveling, you may choose a card that will earn you travel miles. Always remember to pay off your balance each month, or at least pay more than the minimum payment so that you have less to pay in interest.