Unveiling the Advantages: A Guide to Student Credit Cards

For young adults stepping into financial independence, a student credit card can be a valuable tool. These cards offer an introduction to the world of credit, often with more lenient requirements than traditional credit cards. This article explores the benefits of student credit cards, how they work, and what to consider when choosing one.

Introduction to Student Credit Cards

A student credit card can be an excellent starting point for building a credit history. Because college students may not have extensive income or a long credit history, these cards typically have more relaxed approval requirements. Some student cards also come with added perks like lower annual fees or cash-back rewards.

Credit Limits: Starting Small

Student credit cards often come with lower credit limits compared to standard credit cards. The smallest credit line available on a Discover Student card, for example, is $500. While this may seem restrictive, it serves a purpose. Lower credit limits can help students manage their spending and develop responsible money habits early on. Credit card companies often set these lower limits because lending to individuals with limited income and credit history carries inherent risks.

The Benefits of Lower Limits

Small credit lines aren’t only about protecting the lender. Managing a high credit limit while juggling schoolwork and learning credit basics can be challenging. A low limit on a student credit card can act as a set of training wheels, helping students learn to manage their finances responsibly.

Building Credit History

Establishing good credit is as important to college students as maintaining a good GPA. A credit card is one of the best ways to build a credit history and demonstrate responsible credit management. One effective strategy involves using your card for small, affordable monthly expenses like subscriptions, school supplies, or groceries, and then paying the balance in full each month.

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Factors Influencing Approval

While a credit score isn’t always required to apply for a student card, Discover, for example, may consider any existing credit history. Income and existing debt are also factors that influence approval decisions.

Managing Your Credit Card

Many credit card accounts come with features that make managing your card easier. For example, you can use your credit card's mobile app or set up text message alerts to keep track of your spending and avoid exceeding your limit. Enrolling in automatic payments ensures you never miss a due date.

Credit Utilization Ratio

If you spend a lot, you may increase your credit usage compared to your available credit. High credit usage may hurt your credit score. When you have a low credit limit, a relatively small credit card balance may increase your credit utilization ratio significantly, especially as it accrues interest.

Credit Limit Increases

Remember, you’re not stuck with the initial credit limit. Once you have some experience using your credit card responsibly, you might want more spending power. When you’re ready, consider asking for a credit limit increase. It's best to do this after you've maintained timely payments and a low balance for several months.

Beyond Graduation

As you approach the end of your college journey, you may wonder what will happen to your student credit card. With Discover, you can typically keep using your card as you normally would.

Popular Student Credit Card Options: Capital One vs. Discover

Some of the most popular student credit cards are offered by Capital One and Discover. Both issuers provide student cards with excellent perks for teenagers and young adults. The best card for you will likely depend on your spending habits and credit score.

Capital One Quicksilver Student Cash Rewards Credit Card

Rewards: 1.5% cash back on all purchases

Capital One Savor Student Cash Rewards Credit Card

Rewards: 3% cash back on dining, entertainment, select streaming services, and grocery stores; 1% on other purchases; 5% back on hotels, vacation rentals, and rental cars booked through Capital One Travel

Discover it® Student Cash Back

Rewards: 1%-5% cashback on rotating categories each quarter (requires activation)

Discover it® Student Chrome Rewards

Rewards: 1%-2% cashback

Similarities Between Capital One and Discover Student Cards

The student cards from Capital One and Discover share many beneficial features:

No annual fee
No foreign transaction fee
Earn rewards
Earn a welcome bonus

Differences Between Capital One and Discover Student Cards

Credit Score Requirement

Capital One requires at least fair credit (a score between 630-689) to qualify for one of its student cards. Discover, on the other hand, approves applicants without a credit history, making it a more accessible option for students with bad or no credit.

Rewards Structures

Each Capital One and Discover student card has its own rewards structure.

The Capital One Quicksilver Student Cash Rewards Credit Card offers a low-maintenance, flat 1.5% cash-back rate on all purchases.
The Capital One Savor Student Cash Rewards Credit Card offers tiered rewards, including 3% back on dining, entertainment, select streaming services, and grocery stores, and 1% on other purchases. It also earns an unlimited 5% back on hotels, vacation rentals, and rental cars booked through Capital One Travel.
The Discover it® Student Cash Back card requires more active management, as the rewards categories change every 3 months, and you must opt-in to them each quarter to earn the top rate.

Welcome Offers

Capital One cards offer a standard welcome bonus: Earn $50 when you spend $100 in the first three months.
Discover cards offer a unique welcome offer: Discover will automatically match all the cash back you’ve earned at the end of your first year!

Late Payment Forgiveness

Only Discover’s student cards waive the late fee on the first late payment, a rare perk among all credit cards.

Introductory APR Offer

Discover’s student cards offer an introductory APR period for both purchases and balance transfers: 0% intro APR on Purchases for 6 months and 10.99% intro APR on Balance Transfers for 6 months, and then the ongoing APR of 16.49%-25.49% Variable APR.

Choosing the Right Card

The student cards from Discover and Capital One are excellent products with many benefits typically found in non-student cards, but without the need for excellent credit.

Before applying, check your credit score. If you have less than fair credit, a Discover student card may be your best option due to Capital One’s credit score requirements.

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