With classes at colleges and universities around the country soon to begin, Card Hub today announced its list of the Best Credit Cards for College Students in order to help young people begin financial independence on the right foot.
While the days of college students applying for credit cards at football games just to get free t-shirts now behind us and the CARD Act instituting new hoops through which people under the age of 21 must jump if they are to access credit, the importance of building a good credit score has not diminished and a credit card remains the best tool with which to do so.
In looking for the right credit card, a student’s top priority should be to build credit as inexpensively as possible. As a result, Card Hub’s selections for the Best Credit Cards for College Students in 2012 – which were developed after analysis of over 1,000 credit card offers – includes mostly cards without annual fees. You’ll find these cards listed below, along with a short description of each offer, and insights from Card Hub CEO Odysseas Papadimitriou.
Students who are confident that they will be able to pay their credit card bills in full each and every month should focus on finding cards that, on average, provide more than 1% cash back on all purchases.
• Citi Forward Card for College Students – 5 points per $1 spent on entertainment (which includes textbooks purchased at book stores) and at restaurants (which includes fast food establishments), 1 point per $1 on everything else, 100 bonus points each month you stay below your credit limit and pay your bill on time, and 1,000 bonus points for signing up for paperless statements during the first three months.
• Journey Student Rewards from Capital One – 1.25% cash back on all purchases when you pay your bill on time and no fee for foreign transactions (great for students studying abroad).
• Citi Dividend Platinum Select Card for College Students – 5% cash back on supermarket, drugstore, gas station and utilities purchases for 6 months (1% thereafter); 2% on rotating spending categories and 1% on everything else.
Odysseas Papadimitriou (OP): “There are a number of attractive student rewards credit cards on the market and deciding between them necessitates considering their value through the prism of your lifestyle. It’s tempting to simply opt for whichever card offers the most points, miles, or cash back, but if earning them necessitates signing up for rotating spending categories when you know you’ll forget to do so, or the best rewards aren’t being linked to the things you spend the most money on, another card might be preferable.”
0% Purchase APR
Students who will require a bit of additional time to pay down necessary big-ticket purchases associated with the beginning of the school year (e.g. computers, books, furniture, etc.) should open the following 0% student credit card in order to avoid burdensome finance charges:
• BankAmericard for Students – 0% purchase APR for 15 months—the longest 0% intro term currently being offered and only three months less than what the best 0% credit card for people with excellent credit offers.
(OP): “Choosing a 0% student credit card is not hard – just go with whichever card offers the longest 0% introductory term without charging an annual fee. This year that card is the BankAmericard for Students, and the fact that it offers 0% for 15 months is actually pretty remarkable. Students spent an average of $330 on textbooks last fall, and if you add a new computer to the mix, you could easily be looking at around $900 in debt. Most college students won’t be able to immediately foot that bill on their own and when you consider that the average student credit card interest rate is 16.30%, the cost of paying off this balance over time could be substantial. More specifically, using a credit card calculator will reveal that you’d have to pay $95 per month in order to pay off a $900 balance on the average student credit card within 15 months, and you’d incur $530 in interest charges doing so. With the BankAmericard for Students, on the other hand, you could be debt free without wasting a penny on interest by merely paying $60 per month. In other words, the value of such a card is obvious.”
0% Balance Transfer APR
For the smaller segment of the student population that has already incurred credit card debt, transferring a balance to the aforementioned BankAmericard for Students also happens to be the best way to lower the effective cost of this debt and make it easier to become debt free:
• BankAmericard for Students – This card offers 0% on balance transfers for the same 15-month period that it offers 0% on new purchases, making it the best student balance transfer card in addition to being the best card with which to avoid interest on upcoming purchases. However, students should realize that their balance transfers won’t be completely free, as the BankAmericard for Students charges a 3% balance transfer fee.
(OP): “Oftentimes, students may incur debt before they have a chance to get a card offering 0% on new purchases, in which case a balance transfer credit card will prove useful. It’s not always the case that the same card offers the best deal on new purchases and balance transfers, but it’s not unheard of either. The biggest things consumers need to watch out for when considering a balance transfer are the transfer fee and how long it will take them to pay down what they owe. Either a particularly high initial cost or having a balance remaining when the card’s regular APR kicks in could significantly affect the cost of a balance transfer and therefore its ultimate value.”
Secured Credit Card
Occasionally, students will find themselves with already-damaged credit as a result of being an authorized user on a parent’s account, failing to pay a cell phone bill, etc. They might therefore be unable to qualify for a student credit card and will instead need to place a down payment on a secured credit card. Secured credit cards offer basically guaranteed approval and are no different from unsecured cards in terms of credit building benefits.
• Capital One Secured MasterCard – Not only is this card’s $29 annual fee one of the lowest among secured credit cards, making it one of the cheapest credit building tools for students with damaged credit, but it could also end up being partially secured (i.e. the credit line it provides may be higher than the $200 deposit you are required to place in opening it).
(OP): “Students with damaged credit often assume that their best course of action is to do nothing, that simply curtailing use of credit will solve their problems. That’s actually the worst approach they can take. In order to improve their credit standing, students need to devalue the negative information in their credit files with positive information, and the best way to do so is with a secured card. Not only will a secured card report positive information to the major bureaus on a monthly basis as long as you make on-time payments or simply lock your card away unused, but it will also prevent you from spending beyond your means given that your credit line is, in most cases, equal to the security deposit you place in opening it.”
For more on Card Hub’s Best Credit Cards for College Students – 2012, visit: CardHub.com