Credit Cards for Students with No Credit
Upon turning 18, you can take out a credit card under your name. As credit cards are an excellent tool to build credit and give you more freedom with finances with their added perks/bonuses, most people opt for one. Credit cards work using a pre-set limit that the bank will decide on. Similar to a loan, that amount is how much the bank has agreed to lend you each month. Whenever you make a purchase, that expense comes from borrowed money and does not directly come from your bank account.
All credit card charges are expected to be paid at least the minimum at the end of every month. Failure to fulfill adequate and prompt payments could result in detrimental financial difficulties. Since the foundation of credit cards is built on timely payments and borrowed money, banks need to ensure they can trust their clients to complete their obligations. Otherwise, they must deal with financial loss and implement extensive steps to recover their money.
Most banks will evaluate applicants based on their credit history because it provides a good idea of what to expect from you. As a high school graduate opening their first credit card, you will realize that you have no credit history to account for. If this is you, do not fret because there are many credit cards for students with no credit available. Specifically, there are credit cards geared toward students that fit this criterion. These cards are a great opportunity for students to develop their credit scores and gain access to exclusive rewards.
Student credit card
A student credit card is designed for college students allowing those with a credit score to apply. Yet, students might be asked to prompt a co-signer or their source of income that will help pay off monthly bills.
They function the exact same as any other regular credit card. However, they might have lower credit limits and higher APR rates. These numbers fluctuate based on the credit card account you open, so be sure to compare opportunities before making any agreements.
Additionally, some student credit cards provide special benefits such as cell phone coverage, cash back, traveling, gas, etc.
With no additional annual fee, lower eligibility requirements, and student geared benefits, a student credit can be a great first step for you.
Secured credit card
Similar to student credit cards, secured credit cards are for those with no credit or damaged credit. If your lender determines your lack of history as a risk, they may approve you for a secured credit instead, as it provides a security cushion for both them and you.
While secured credit cards function like any other card and are offered through well-known credit card companies, they require a deposit to open the account. If you fail to make on-time payments, this deposit acts as insurance and will be seized immediately.
After consistently paying on time and in full, the lender might eventually offer you regular credit with a credit limit increase and better benefits. Regardless, if you are in good standing and decide to close the account, your deposit will be returned back to you immediately.
Are there good credit cards for students studying abroad?
One important aspect of college for students all over the world is studying abroad. Whether for a semester, a year, or the entire program, traveling can be an exciting experience. However, managing finances through it all can be somewhat difficult and expensive if not approached properly.
If you foresee your collegiate experience to include a lot of traveling as an international student, it might be worthwhile to look into credit cards that offer programs that help you save on foreign transaction fees.
Otherwise, you might be charged extra for every transaction made in any other currency than USD. When you are spending months or years away, these expenses can add up and drain your bank account much faster.
While there is not one specific credit card that is best for studying abroad, a magnitude of student credit cards offers exclusive benefits as a bonus. When researching which credit card is best for you, voice your desire to go international to inquire about their foreign transaction fee policy.
What can you buy with a student credit card?
Given the nature of credit cards, it can be really easy to take advantage of them. While it may seem like free money as it isn't required to be paid until the end of the month, overspending on unnecessary items could prompt severe consequences in the future.
You want to ensure that every purchase made on the student card is appropriate and restrain from buying anything that does not fit a certain category. Negligence could accumulate a ton of debt which will increase depending on the interest rate and lower your credit score.
A bad score will prohibit future lenders from approving you for another credit card or any other type of loan, including a mortgage, car loan, etc. It could also diminish your chances of getting a rental property like an apartment.
The best purchases to make are the ones that will give you good practice in managing your finances and will also be easy to pay in full at the end of the month. To build a stable foundation, it is incredibly important that your finances are well within your budget and nowhere near your credit limit. Your preliminary goal should be to build up a positive credit history.
While this will vary on the student, appropriate expenses may include groceries, gas, school supplies, and transportation fees to name a few. These are all consistent and relatively payable. If managed adequately, you should be able to build credit while simultaneously avoiding debt.
Stay away from making any big purchases, at least in the first few years of your bank account opening. Student credit cards typically have higher interest rates than traditional credit cards, so if you were to put yourself in a difficult situation financially, it would be much more costly to get out of it.
Frequently Asked Questions
Can You Pay Tuition with a Credit Card?
In very few cases - Yes. Using a credit card to pay off mandatory fees might allow for greater flexibility and more rewards. Although somewhat useful, it typically is not the best course of action, and the cons may well overpower any pros.
First, tuition payments typically exceed the credit limit for most credit cards. It will most likely incur fees for the use of credit, which will cost you much more in the long run. Student loans usually have much lower rates when comparing interest rates, making them a cheaper option to depend on.
Similarly, if you fail to make at least the minimum payment at the end of the month, you could damage your credit score. That missed payment history would then be reported to the credit bureaus and added to your credit report permanently. It will be heavily considered when taking out a loan in the future.
Bottom line - there are smarter ways to finance your tuition payments. Scholarships are probably the best opportunity because of their free financial support that does not need to be repaid following graduation. There are countless scholarships featured on Bold.org that are quick and easy to apply to.
Even student loans offer exclusive benefits such as a grace period, repayment plans, student loan forgiveness, and more. By defaulting to using a credit card, you might miss out on other great financial aid tools while simultaneously putting your credit card at risk. Instead of tuition payments, try to gear your credit card use towards purchasing essential supplies while at college.
What Does It Mean to Have a Maxed Out Credit Card?
Every credit card comes with a credit limit, which is the maximum amount of money you are allowed to spend within a given month. A maxed-out credit card is when you have exceeded your credit limit allowance - there's no more credit available for other purchases until that debt is paid off. This has the capacity to negatively impact your credit score and increase your monthly payments.
Reaching your credit limit affects your credit utilization ratio. This ratio indicates the percentage of how much credit you are using. When you maximize a credit card, that percentage is 100%, which is recommended to be below 30%. Furthermore, your card can decline all the following payments. This can be quite inconvenient if you are in an emergency and need to purchase something fast.
Some credit card issuers might even charge over-the-limit fees, which typically should exceed the amount you spent over the limit. With this in mind, it is especially important that you are being careful and mindful of how much you are spending.