How to apply for a credit card while in college

Credit card 101: Applying for a credit card as a college student

Class is in session! As a college student, do you know the best way to get – and use – a credit card? It’s ok if you’re new to the world of credit: we’re here to help.

  • Benefits of credit cards for college students
  • Applying for a credit card as a college student
  • Credit card tips for college students
  • Why college students should have credit cards

Benefits of credit cards for college students

Credit cards can be a valuable tool for spending and budgeting – as long as you use your card responsibly. Spending recklessly on a credit card can cost you a lot in interest and may result in your credit score taking a hit.

If you commit to responsible credit behavior, a credit card delivers the following benefits:

  • More financial flexibility. Unlike paying with cash or a debit card, credit cards let you repay over time. If you make a purchase on a credit card, you have until the statement due date to pay what you owe without accruing interest.
  • Protection against fraud. Credit card issuers can’t hold you liable for purchases made to your card without your consent – as long as you notify them promptly if your card goes missing. Some cards even offer one-time-use "virtual" card numbers so you don’t have to share your real card information with merchants.
  • Rewards and perks. Certain credit cards offer rewards like cash back, hotel points or airline miles. Higher-end cards may even include features like concierge services.
  • The chance to build credit. Your credit score might not matter much to you now, but a good score will provide you with more options in the financial marketplace in the future. Plus, some landlords and employers will check your credit score to assess how responsible you are with money. A good score will put you in their good graces.

Applying for a credit card as a college student

Apply for a traditional card

Traditional credit cards have many upsides however Congress made it harder for college students to get a conventional card when they passed the 2009 Credit CARD (Card Accountability, Responsibility and Disclosure) Act.

The act requires that people under 21 can only get a credit card if they:

  • Can demonstrate the ability to pay back any charges they incur; or
  • Have a co-signer who is over 21 and has the ability to make payments.

If you can show that you have sufficient income or a trusted co-signer, a traditional credit card may be a good choice for you.

Apply for a secured credit card

A secured card works just like a traditional card when it comes to making purchases. It’s the application process that’s different: You need to make a deposit that will serve as collateral.

Your secured card’s limit will be no larger than this deposit, which may limit your ability to make big purchases with the card. But secured cards are available to people as young as 18. Since they require collateral, they may have a higher approval rate for those with bad or no credit. Not all banks or credit card companies offer secured credit cards, so be sure to do research on which cards might be available to you.

Become an authorized user on another person’s card

Authorized users are typically a cardholder’s family members. But anyone can become an authorized user on another person’s credit card: That person simply has to contact their card issuer and make the request. If it’s approved, the user will receive a card in his or her name.

The real benefit to becoming an authorized user is that it can help build your credit. Some, but not all, card issuers report authorized users’ payment histories to the credit reporting agencies.

Open a joint credit card account

Becoming a joint cardholder is similar to getting added as an authorized user, with one key difference: Every cardholder on a joint account is legally liable for the card debt.

In addition, joint credit card account activity is guaranteed to show up on your credit report. If you find a joint account holder with excellent credit, you can take advantage of their credit history to get better terms than you might otherwise be able to. Keep in mind that joint credit card accounts are not commonly offered by banks or credit issuers and you are more likely to find cards that allow you to have authorized users.

Credit card tips for college students

Credit is a powerful financial tool: giving you fraud protection, the ability to make purchases that you might not be able to afford in cash. Plus, some credit cards offer opportunities to earn cash back or other rewards.

Yet like any tool, credit can be misused. Be smart about shopping for and using a credit card to stay out of financial trouble and support a good credit score.

Keep the following in mind to get the most out of a credit card and maintain your financial health:

Shop around to find the card that fits your needs.

There are dozens of different credit cards available to college students. You may find searching through credit cards confusing but take the time to do your research and find the absolute best card for you. And be sure you read your top-choice cards’ terms and conditions closely before you apply.

Only apply to the card(s) you are confident you want.

Every time you submit a credit card application, the card issuer will order a copy of your credit report. Many of these requests in a short time frame can negatively affect your credit score – so keep your applications to a minimum. Requesting pre-approval for a credit card does not guarantee that the applicant will be approved. However, requesting a pre-approval will not hurt your credit score.

Keep your card spending within your budget.

Perhaps the most important credit tip is to stay on top of your spending. When you’re making purchases with a card swipe, as opposed to paying in cash, it can feel like you’re playing with house money. But this is how you get into trouble: instead, treat card spending like paying with cash or a check. In addition, consider using your card issuer’s mobile app to track your spending and stay within your budget.

Check your credit report regularly.

You are entitled to one free credit report annually from each of the Credit Reporting Agencies (Equifax ® , Experian ® and TransUnion ® ). You can order your report from all three CRAs at the same time — or pull a single report every four months. Whichever option you choose, commit to checking your credit report regularly to monitor for any suspicious activity.

Why credit cards could be beneficial to college students

For college students, credit cards offer financial flexibility and a way to build credit. Still, having a credit card is a big responsibility. It’s important to treat credit carefully: conduct research to find the card you want, understand how card spending fits into your overall budget and use credit at a level you can afford.

If you make a habit of paying your bills on-time, you can build a strong credit history for your future. When you pay off your entire credit balance every month, you can avoid interest charges and use category spending (such as gas or groceries) to earn cash back and rewards points from credit cards with perks.

Your first lessons in credit can last you a lifetime, opening up a credit account can help you graduate into the real world with a responsible credit history to last a lifetime.

Reader Sean asks the following question on the “Ask Lucky” page of the blog:

Hey Lucky, do you know how available are travel reward cards for people with little or no credit history? I’m a college freshman and aspiring FFer, but I’m not sure if I’d be able to get any of the lucrative credit cards you reconmend. Any advice? Thanks

Let me start by saying I’m no credit expert. I can only share my experiences, given that I was in Sean’s situation a few years ago, and I remember how frustrated I was. Everyone talks about how important it is to build your credit, but how can you build it when no credit card company will give you a chance due to lack of a credit history? It’s kind of like trying to find your first job when all the companies you apply to want to know about your job experience.

The thing I was most excited for when turning 18 was being able to apply for a mileage credit card (and the thing I was most excited for when turning 21 was… being able to rent a car), and on my 18th birthday I applied for a Citi AAdvantage Mastercard and got denied. Oops.

I quickly realized I’d need to start slow, so I then got a student credit card. It was a Discover student credit card (the exact card has been discontinued in the meantime), and my credit limit was $1,000. You shouldn’t have any issue picking up a student credit card, no matter how boring the rewards are (if there are any at all). One card several college aged readers have had no issue getting approved for is the Citi Forward Card for College Students.

Keep the card for about six months, and make sure you charge on it every month and pay your bills on time. Just be sure to keep your credit utilization low, so don’t spend more than 20-30% of your credit line, so you look like a responsible spender.

That’s exactly what I did, and then six months later I went to town applying for “big boy” credit cards. That first day I applied for the Starwood American Express and got instantly approved. I was shocked, so I did what any rational person would do — apply for more cards as if there’s no tomorrow. 😉

That same day I applied for the Citi AAdvantage Visa, Citi AAdvantage Mastercard, and United Visa, all of which I got instantly approved for.

So while that might be somewhat of an oversimplification, the key is to first apply for a student credit card. Then to actually get approved for cards after that, there are a few things to keep in mind:

Apply for a charge card if you can. While it’s only anecdotal, I’ve found that charge cards (as opposed to credit cards) are easier to get approved for. What’s the difference? You technically have to pay off a charge card every month, while you can finance a credit card. The logic is that you’re less of a credit risk to the bank, since you can’t finance something long term.

Become an additional/authorized user on a credit card if you can. If your parents have been long-time users of a certain credit card, ask them to add you to the card as an additional user, even if you won’t actually spend any money on it. It doesn’t always work, but sometimes the credit history will actually be applied to your credit score, which can drastically increase it. Even if you don’t spend a dime on the card, it can do wonders for your score (sometimes).

Personal income vs. household income. If you’re a college student you may very well “technically” live with your parents. Once you apply for the “big boy” cards, answer the questions on the application honestly, but keep in mind what they’re asking. Many credit card applications ask for household income as opposed to individual income, so take full advantage of that.

Hope that helps and let me know if you have any questions!

For more information on many of the cards mentioned above, see the “Best Credit Card Offers” page of the blog.

How to apply for a credit card while in college

Before you’re approved for a credit card, card issuers have to make sure you can afford to pay any balance you might charge. That also goes for college students, many of whom don’t earn a regular paycheck. So you may be wondering: Just what are the income requirements if you’re in school? Applying for a card as a student can be tricky, but you do have options.

To help young adults avoid getting trapped with credit card debt they couldn’t afford to repay, the federal government made the rules for people under 21 more stringent in 2009.

Types of Income Considered

By law, credit card issuers are required to consider your ability to pay before approving your application. Most applications include guidelines about what they want to know, and those vary in detail. All applications will ask for income—sometimes called "total income" or "personal income." Here’s what you should and shouldn’t include.

Income From a Job

Income is earnings from full or part-time jobs, including seasonal employment, self-employment, or internships. Capital One says if you have a job as part of a work-study program, you should include that as well.

Money From Parents

The rules about receiving funds from a parent are more strict if you are under 21. Young adults are only allowed to include financial help from a parent or someone else if the funds are regularly deposited into an individual or shared bank account with their name on it. For those who are at least 21, however, income from someone else (like a parent or spouse) can be included if it’s regularly used to pay the applicant’s expenses, whether there are bank account deposits or not.

Financial Aid

Many students worried about getting approved for a credit card want to know whether financial aid can be included in their income. Credit card applications often don’t address that question. How you use your aid is a big factor in whether it can qualify as income. The Discover it Student Cash Back card, for example, only lets you include scholarship or grant money if it’s used for living expenses. For cards issued by Bank of America, you’re allowed to include money from scholarships, grants, and financial aid that you have remaining after you cover your direct education expenses, according to a bank representative.

Student Loans

Student loans are a type of debt, not income, and you probably don’t want to start an early habit of paying off debt with debt. Credit card issuers—including Bank of America, Barclaycard, and Capital One—say they don’t let applicants use loans as income, but the rules may vary by issuer. Technically, issuers are allowed to include any student loan proceeds that aren’t used to cover tuition or other bills from the college, such as proceeds used for living expenses.

You can include alimony and child support in your income, but you don’t have to.

Getting a Co-Signer or Other Options

If you don’t meet the income requirements on your own, you can still have a family member or someone else 21 or older co-sign with you, as long as the issuer allows co-signers. Just remember that co-signers have the same responsibility for credit card debts; the charges and payments on the card will affect their credit score just as much as yours.

Another option is to be an authorized user on another adult’s credit card. Your income isn’t considered at all. Still, you must have a relative or friend who trusts you and agrees to it, just like when you use a co-signer. As an authorized user, you can make purchases, but the credit card issuer won’t require you to make payments on the balance.

How Much Should You Make to Get a Credit Card?

Issuers don’t specify an amount of income you must have to qualify for a credit card. However, the higher your income, the more likely you’ll be approved for the card, and the higher your credit limit will be. (Some may ask for proof of your income, so have a copy of your pay stubs, bank statements, or other income available.)

If your credit card application asks for your annual income and you’re paid weekly, multiply your weekly amount by 52. If it asks for monthly income, multiply your weekly amount by 52 and then divide by 12. Also, pay attention to whether the issuer wants gross (before taxes) or net income.

Don’t be tempted to inflate your income so you can qualify for the credit card. Technically, that’s illegal. If you’re caught, you could be prosecuted. Inflating your income also puts you at risk for getting a credit limit you can’t handle. While the thought of a large credit limit may sound great, you don’t want to rack up thousands of dollars in high-interest credit card debt before you’ve graduated.

Frequently Asked Questions (FAQs)

Can a student get a credit card?

Yes, a college or graduate student can get a credit card. You will need to show proof of income, which you can do if you have a job. How high your income is will impact how high your credit limit will be. If you don't have your own income, you may not be able to get a credit card without a co-signer.

What is a student credit card?

Student credit cards are intended for college students with little income. They have lower credit limits than regular credit cards and are designed to help students build a credit history. If you are under 21 or have little income of your own, some student credit cards may require you to have a co-signer.

What happens to a student credit card after I graduate?

After you graduate, many financial institutions will let you keep your credit card account open. Once you notify yours that you've finished school, it will reclassify your account as a regular credit card rather than a student card. You can also close your student credit card account, but that could hurt your credit score.

Select analyzed 13 college student credit cards, digging into each card's perks and drawbacks, to find the best of the best based on your spending habits.

How to apply for a credit card while in college

A good credit score is essential when you're making many of the major life decisions that you face after graduation, such as renting an apartment or applying for an auto loan. Opening a college student credit card is a smart way to start building credit early while also taking advantage of rewards and special financing offers.

There are numerous college student cards available, each providing unique benefits for different types of students — from travelers and foodies to commuters and international students. Some cards are lenient with credit history requirements, meaning you may qualify with no credit history at all. You do have to be 18 to apply for a credit card and need to have a steady source of income.

If you're feeling overwhelmed by all the choices, don't stress. We did the research for you. Select analyzed 13 college student cards, digging into each card's perks and drawbacks, to find the best of the best based on your spending habits. (See our methodology for more information on how we choose the best cards.)

Here are Select's picks for the top college student credit cards:

  • Best for Cash Back:Discover it® Student Cash Back
  • Best for Travel: Bank of America® Travel Rewards for Students
  • Best for Gas Stations and Restaurants:Discover it® Student chrome
  • Best for Small Purchases and Supermarkets: Citi Rewards+℠ Student Card
  • Best for International Students and No Credit History:Deserve® EDU Mastercard for Students

Best for Cash Back

Discover it® Student Cash Back


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

Welcome bonus

Discover will match all the cash back you've earned at the end of your first year

Annual fee

Intro APR

0% for 6 months on purchases

Regular APR

13.24% – 22.24% Variable

Balance transfer fee

3% intro balance transfer fee, up to 5% fee on future balance transfers (see terms)*

Foreign transaction fee

Credit needed

Fair / New to Credit

  • Cash-back program
  • Generous welcome bonus
  • Cash-back categories must be activated each quarter
  • Cash-back program limits earnings: Enroll every quarter to earn 5% cash back in various categories on up to $1,500 in quarterly purchases, then 1%
  • You must be a U.S. citizen and college student to apply for this card

Who's this for? The Discover it® Student Cash Back card is a well-rounded card with no annual fee that offers college students enrolled in a two- or four-year college the chance to build credit, while earning rewards. You must be over 18 and a U.S. citizen to apply.

Cardholders can enroll every quarter to earn 5% cash back on rotating categories (such as, gas stations or restaurants), on up to a $1,500 maximum each quarter (then 1%). All other purchases earn unlimited 1% cash back automatically.

There are no foreign transaction fees, which makes it a good choice for students studying abroad.

If you need to finance textbooks or dorm room essentials, you can take advantage of the introductory 0% APR for the first six months on new purchases. After the intro period, there's a 13.24% – 22.24% variable APR. We always recommend you pay your balance on time and in full in order to avoid interest charges.

Best for Travel

Bank of America® Travel Rewards for Students credit card


Unlimited 1.5 points for every $1 spent on all purchases

Welcome bonus

25,000 bonus points after you spend at least $1,000 in purchases in the first 90 days of account opening, which can be redeemed for a $250 statement credit toward qualifying travel purchases

Annual fee

Intro APR

0% APR for the first 12 billing cycles on purchases

Regular APR

13.99% to 23.99% variable

Balance transfer fee

Either $10 or 3%, whichever is greater

Foreign transaction fee

Credit needed

  • No annual fee
  • Points can be redeemed for flexible travel expenses, including flights, hotels, vacation packages, cruises, rental cars or baggage fees
  • No limit or expiration on points
  • Strong welcome bonus of 25,000 points if you spend $1,000 in the first 90 days
  • Intro 0% APR for 12 billing cycles on purchases
  • No fee charged on purchases made outside the U.S.
  • You don’t have to be a U.S. citizen to apply for this card
  • Promotional 0% APR does not apply to balance transfers
  • No student-centric benefits or incentives to practice responsible credit behavior
  • Estimated rewards earned after 1 year: $466
  • Estimated rewards earned after 5 years: $1,528

Rewards totals incorporate the points earned from the welcome bonus

Who's this for? The Bank of America® Travel Rewards for Students is a great choice for college students who plan on studying abroad or traveling during breaks. The rewards program is geared toward travel, and cardholders earn 1.5 points per dollar spent on all purchases.

You can redeem rewards as a statement credit to cover the cost of qualifying travel purchases — a simple way to reduce the cost of taking a spring break vacation or buying a plane ticket home. There are no foreign transaction fees, making it an ideal card for students studying abroad.

Cardholders with a Bank of America checking or savings account can see added value with this card. You receive a 10% customer points bonus simply by having a Bank of America account. That increases the rewards rate to 1.65 points per $1 spent. Cardholders can redeem their rewards at any time and at any amount, including when shopping on Amazon.

This card also comes with a longer-than-average special financing offer of no interest for 12 billing cycles (then 13.99% to 23.99% variable APR). A full year of no interest is a great way for you to pay off new purchases over time, without incurring interest charges.

You must be 18 or older and enrolled in school (college, vocational or trade school) to qualify for this card.

Start building a credit score early so you can graduate to even better options.

How to apply for a credit card while in college Megan Horner

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You can’t apply for a credit card on your own if you’re under 18, and card providers will be sticklers about checking your income if you’re between 18 and 21. Still, it’s possible to get a credit card. Here’s what you should know about restrictions, authorized users and cosigners, secured and student cards and your best options by provider.

How to get a credit card if you’re between 18 and 21 years old

Once you turn 18, you’re allowed to get a credit card on your own. However, it’s a little more difficult to get one when you’re under 21. Federal lawmakers didn’t want young consumers to accumulate mountains of debt, so they passed the CARD Act of 2009.

The CARD Act also stipulates that if you’re under 21, you must prove your ability to pay your card bill. You can report income that you earn on your own, such as scholarships and grants or wages from your job. If you don’t have sufficient income, your other option is to add a cosigner — someone who agrees to pay if you default. If you pay late, you could damage your cosigner’s credit history.

If you’re unsure whether your income qualifies or you need a cosigner, call your card provider. In many cases, your provider will contact you with further steps after you submit your application. For more information on whether you’re ready for a credit card, check out our full guide.

How to get a credit card if you’re under 18 years old

If you’re under 18, you’re not allowed to get a credit card on your own. It is possible to get one, though: You just need to be an authorized user on someone else’s card account. As an authorized user:

  • You’ll get a credit card in your name that you can use.
  • You’re not technically on the hook for making payments — that responsibility lies with the primary cardholder.
  • You may build credit as long as the primary cardholder makes payments on time.

Check out our full guide for credit cards for teens for more tips and advice on building credit when under 18.

Provider rules and recommended credit cards

Card issuers have different rules for authorized users and cosigned applications. Here’s a handy guide on what issuers allow (or don’t allow), as well as who offers the best secured and student cards.

Minimum age for authorized users Cosigner allowed for those under 21 Secured or student options available
American Express 15 How to apply for a credit card while in collegeNo How to apply for a credit card while in collegeNo
Barclaycard 13 Yes Yes
Bank of America None Yes How to apply for a credit card while in collegeNo
Capital One None How to apply for a credit card while in collegeNo Yes
Chase None How to apply for a credit card while in collegeNo How to apply for a credit card while in collegeNo
Citi None How to apply for a credit card while in collegeNo Yes
Discover 15 How to apply for a credit card while in collegeNo Yes
HSBC None Yes How to apply for a credit card while in collegeNo
US Bank 16 Yes How to apply for a credit card while in collegeNo
Wells Fargo None How to apply for a credit card while in collegeNo How to apply for a credit card while in collegeNo

What are my alternatives?

If you’re between 18 and 21 years old, your main problem may be the lack of a credit history. Many card providers simply won’t let you borrow money until they can see how responsible you are. Try these options instead.

Should you wait until high school, college, after graduation, or even later?

It may not seem like it, but it is possible to go through life without a credit card. That being said, when used responsibly, credit cards offer numerous advantages over some other payment methods. They’re convenient, protect you against fraud and theft, and sometimes offer cash back and other rewards. They can also help you build the credit history you’ll need if you want to borrow money to buy a home or a car. Here are some points for parents and their offspring to consider in deciding when to get that first card.

Key Takeaways

  • For a young child, a debit card linked to a checking account may be a better idea than a credit card.
  • Later, consider a low-limit credit card in a parent's name, but with the child as an authorized user.
  • At college age, the child may be eligible for a student credit card, but be sure to shop around.
  • Recent grads who haven't had a credit card yet may need to start with a secured credit card.

High School

Why You Shouldn't Wait

Parents who introduce their kids to the concept of handling credit in their teen years may better prepare them for using it responsibly in the future. A credit card probably shouldn't be a high schooler's introduction to personal financial management, however.

As an alternative, some experts recommend opening a youth checking account with an attached debit card when a child is in middle school. Parents can teach the child how to monitor the balance in the account and use their debit card wisely.

After that, they can move on to a low-limit credit card when the child is slightly older. If the child is under 18, the card will generally have to be in a parent’s name, with the child listed as an authorized user.

Why You Should Wait

High schoolers can succumb to the same temptation that many adults do to spend more on their credit cards than they can afford to pay back. Plus, if the child is an authorized user on a parent’s card, their overspending could reflect poorly on the parent and impair their credit score.


Why You Shouldn't Wait

At age 18, students may be eligible for a credit card in their own name. If they don't have a credit history by the start of college, getting a card now will help them begin to establish one. That will be important down the line, when it comes time to rent an apartment or apply for a mortgage.

Many credit card issuers have cards specifically designed for students, but as with any other kind of credit card, it’s smart to shop around and compare rates and terms. Investopedia publishes regularly updated lists of the Best Student Credit Cards.

Why You Should Wait

If someone has never had a debit or credit card by the time they go to college, it might be safest to start with a debit card linked to their own checking account or a parent’s. Many student credit cards have high interest rates, so it’s easy to run up debt, especially if they miss a payment or two.

In addition, parents can't easily supervise their children's credit card spending habits when they're away at college, so it might be a bad place for them to experiment with credit for the first time.

Wouldn't it be worse to wait until after graduation? Maybe, but paying with cash or debit will keep them out of trouble. Starting adult life with a load of high-interest debt and/or a poor credit history puts recent grads at a major disadvantage and can be worse than having no credit history at all.


Paying bills on time and not having too much debt outstanding are the two most important factors in building a strong credit score.

Recent College Graduate

Why You Shouldn't Wait

Getting a credit card is an easy way to establish a credit history and begin to build a solid credit score. Plus, a credit card is sometimes required for things like renting a car or booking a hotel room.

Grads who don’t have enough of a credit history to get a conventional credit card can start out with a secured credit card. That’s a special type of card that requires the cardholder to deposit money with the lender; the deposit then serves as the credit limit on the card. After they’ve used a secured card for a while—and made all their payments on time—the cardholder may be eligible for a regular, unsecured credit card.

Whatever type of credit card they have, it’s important that new grads follow the rules for earning and keeping a high credit score. Credit scores are based on several factors, the two most important of which are payment history (does this person pay their bills on time?) and credit utilization ratio (how much credit are they using at any given time compared with the amount of credit they have available to them?). A person whose credit cards are all maxed out will have a high credit utilization ratio, and their credit score will suffer as a consequence.

Even if the new grad doesn't plan to apply for a mortgage, an auto loan, or another form of debt for which a good credit score is essential, that could change someday. Also, credit scores are used for other purposes, such as setting insurance rates, and prospective landlords and employers may look at them, too. So, establishing a good credit history will pay off in numerous ways.

Why You Should Wait

Anyone who knows they'll have difficulty managing debt might want to forgo getting a credit card until their life is more settled. Credit card companies aren't going anywhere, and the person can always change their mind later.

The Bottom Line

Credit cards are a fact of financial life, and for many people, the benefits of using them outweigh the drawbacks. When someone should get their first credit card will depend in large part on how responsibly they (or their parents) think they will handle it. While establishing a credit history is important, a bad credit history, marred by youthful mistakes, can be worse than no credit history at all. So there's no rush. If a young person isn't ready for a credit card yet, it's fine to wait until they are.

Getting a credit card—and using it wisely—can be one of the best ways to build a solid credit history, especially at a young age. But that’s not only true if you are just starting out, but also if you’ve had some financial difficulties in the past and need to rebuild your credit.

In today’s world, having good credit matters more than ever. A strong credit score can mean better rates when you want to take out a car loan or home mortgage. It can help in renting an apartment because the landlord may check it. And many employers look at credit scores when deciding whether to hire job candidates. Insurers may use them, too, in setting your premiums.

Key Takeaways

  • A credit card is one of the easiest ways to build (or rebuild) your credit history.
  • If you don’t qualify for a regular credit card yet, there are other options, such as secured cards and store cards.
  • Once you get a credit card, be sure to pay on time and try to keep your “credit utilization ratio” under 30%.

Bear in mind that debit cards, while convenient, are of no help in building your credit history. That’s because they don’t involve credit (you’re just spending your own money), and banks typically don’t report that activity to the major credit bureaus. Here are three simple ways to use a credit card to build credit.

Click Play to Learn About Credit Card Applications and Approval

Become an Authorized User

The most straightforward way to build your credit is by taking out a credit card in your own name and paying it down each month. But acquiring a card with reasonable interest rates can be tricky when you have no previous credit history. Some companies have special cards for college students, but these also have requirements many young people may have trouble meeting, such as demonstrating that they have a reliable source of income.

Additionally, the Credit Card Accountability, Responsibility and Disclosure Act of 2009—a.k.a. the CARD Act—made it more difficult for younger Americans to get their own plastic. An applicant younger than 21 years of age has to show proof that the financial means to handle their debt or get a parent (or spouse) to co-sign before becoming eligible for a card.

There is one easier way around this conundrum—ask to become an authorized user on your parent’s card. While that is a common first step into the world of credit, there are some potential hazards to consider. Your credit score will get a boost if mom or dad pays the bill consistently. But if they don’t, your FICO score—a number that’s derived from your credit history—will get bruised, just like theirs.

Keep in mind that the primary account holder is responsible for the entire balance, regardless of who incurred the charges. So if you ask a parent to become an authorized user on their card, make sure you have a clear, mutual understanding of how much you can spend each month.

Using a credit card can help you build a credit history while using a debit card will not.

Start with a Secured Credit Card

A secured credit card is “secured” by the money you deposit into a special bank account. Typically, the credit limit on your card is based on the amount of that deposit. With some cards, the required deposit may be as low as $200 or $300.

Secured cards limit the lender's risks and also help consumers who might be tempted to go wild with a regular credit card stay within their means.

If your bank reports your payments to one or more of the three major credit bureaus, and your credit record is otherwise unblemished, you may have enough of a history to apply for a regular credit card after six months or so.

What's more, once you've demonstrated that you can be counted on to make your monthly payments on time, your secured card lender might be willing to "graduate" you to one of their unsecured cards if you ask. You may want to look for that provision if you're shopping for a secured card. Also, compare the annual fees and other charges on any cards you're considering.

Even with these kinds of cards, the CARD Act still applies. So if you’re between the ages of 18 and 21, you’ll probably need to demonstrate that you have a source of income and document your expenses.

Apply for a Store Card

If getting a standard credit card proves difficult, another option is applying for a store credit card, which many retailers offer for use in their own stores. These cards are generally easier to obtain for people with little or no credit history. They tend to have higher-than-average interest rates, but that won’t matter much if you carry a low balance or pay it in full with each billing cycle.

Other Important Considerations

Even if you find it relatively easy to get a credit card, don't get too many. Having more cards than you need won't help your credit score and may actually hurt it, according to Fair Isaac Corp., which computes FICO scores.

Also, whichever type of card (or cards) you sign up for, be sure to keep an eye on your credit utilization ratio. That’s the percentage of your available credit that you’re currently using. Generally speaking, a credit utilization ratio of 30% or less is considered ideal. So, for example, if you have a total credit limit of $10,000 on your cards, try not to owe more than $3,000 on them at any given time.

What's an authorized user?

This is someone with with permission to use another person's card. They are added to the account by the primary cardholder. The authorized user's credit score will get a boost when the primary holder pays the bill consistently. But if they don’t, the authorized user's FICO score will get dinged. If you become an authorized user, be sure to have a clear, mutual understanding of how much you can spend each month.

What Is a secured card and how does it work?

Secured credit cards resemble regular credit cards with one key difference: They require a “security” deposit, the size of which determines your credit limit with the card, at least initially. The advantage to this card type, compared with using a debit card tied to a checking account or a prepaid debit card, is that account activity is reported to all three major credit bureaus (because a secured credit card is a true credit card with a real credit limit). That reporting allows you to begin building a credit history; assuming it is positive, in time, it should allow you to get a regular credit card and other credit products, such as loans.

What's your credit utilization ratio?

This number is very important to maintaining good credit. It's the percentage of your available credit that you're currently using. Generally speaking, a credit utilization ratio of 30% or less is considered ideal. So, for example, if you have a total credit limit of $10,000 on your cards, try not to owe more than $3,000 on them at any given time.

Bottom Line

Without credit history, getting a card will be difficult. A credit card is one of the easiest ways to build (or rebuild) your credit history. If you don’t qualify for a regular credit card yet, there are other options, such as secured cards, student cards and store cards. Once you get a credit card, be sure to pay on time and try to keep your “credit utilization ratio” under 30%.

How to apply for a credit card while in college

College students get a bad rap when it comes to credit cards. But if used responsibly, college students can leverage credit cards to build a strong financial foundation for their post-college lives.

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If used responsibly, taking out a credit card while you’re in school can really help you build your financial future. As long as you aren’t making charges you can’t afford to pay off – on time and in full – you have a lot to gain from regular credit card usage.

Keep reading for some insight into why college students need a credit card if they want to get a jump start on establishing a healthy financial life.

Build a credit history and score

It takes time to build your credit score. By taking out a credit card in college and using it responsibly for a few years, you can enter the next stage of your life able to secure better lending products and insurance rates. You can also rest easy knowing your credit score won’t get in the way of future job or apartment hunts.

Having a strong credit history and credit score can come in handy in your financial, personal and work life. Many people focus on building their credit score to improve their loan and credit card offerings and to secure lower interest rates; however, having a good credit score can affect a lot more than just borrowing options.

Let’s take a look at how your credit score can affect different areas of your life so you can better understand the importance of working toward a higher credit score.

  • Borrowing money: Your credit score is affects your loan eligibility, borrowing amounts, interest rates and downpayment needs. The higher your credit score is, the easier it is to secure more favorable credit product offers.
  • Job searching: Not every employer reviews applicants’ credit reports to see how responsible and reliable they are, but it’s common for any jobs that require managing money. If you have a low credit score, that may give an employer a reason to choose another candidate.
  • Renting an apartment: Landlords like to see a history of potential renters making on-time payments. If you’re competing for an apartment and lack a credit history the landlord will be more likely to choose another applicant who can demonstrate they pay their bills on time.
  • Applying for insurance: Insurance companies will also review your credit report to see how reliable and responsible you are – the lower your score, the higher your insurance rates will likely be.

Learn responsible credit habits

If a college student spends recklessly, they can get into a lot of financial trouble with their credit card. Before taking out a credit card, it’s important you understand the responsibility you are taking on.

As a rule, you shouldn’t be using credit cards to make purchases you can’t afford. Rather, you should plan to use your credit to make regular necessary purchases, like food and gas. Spending within your means and paying your card off in full each month builds good financial habits that will serve you for the rest of your life, as well as improve your credit score in short order.

“Financial planning for the most part boils down to being proactive as opposed to reactive,” said Peter Palion, certified financial planner and president of Master Plan Advisory. “If you’re proactive early on, a student can graduate with a credit score over… 760 or 780 without a whole lot of effort.”

An important credit card habit students can benefit from learning early on is making on-time payments, or better yet, paying off your credit card immediately after making a major purchase.

Treating a credit card as similar to using cash or a debit card by only making purchases you can afford to pay off right away is the first step to building a good credit routine. This will allow you to reap the rewards of credit cards (convenience and cardholder perks) without running into any downsides (late fees and interest charges).

Credit cards offer valuable protections

Credit cards can do some serious damage when misused, but when used properly they can actually provide consumers with some pretty valuable protections. Not only is shopping online – which all college students do – more secure when using a credit card instead of a debit card, but credit cards typically come with a suite of security offerings like:

  • Zero fraud liability
  • Encryption, chip-and-pin technology and fraud monitoring to help keep personal information safe
  • Purchase warranties
  • Travel insurance policies

When you’re first learning how to navigate life and finances, these protections can act as a nice safety net.

Have a backup in case of emergencies

Without parents nearby, a time may arise when a college student finds they need some extra help. Whether you need essential services on that spring break trip, have an unexpected trip to urgent care or find yourself experiencing car trouble, there may come a time when you need much more cash than you have on hand. In emergencies, a credit card can really come to the rescue.

Bottom line

Taking on a credit card is a big responsibility for a college student, but as long as you are aware of what you can and can’t afford to charge, you can benefit greatly by using one. Starting to build healthy financial habits – and your credit score – when you’re young can help set you up for post-college financial success.