If you’re headed off to college this fall, chances are very good you’ll be presented with multiple opportunities to get a credit card. To start with, your parents could want you to have a credit card. And then, of course, you’ll get all the offers — at the bookstore, on campus or perhaps at the nearby bank or credit union. But do you really need that credit card everyone seemingly wants you to have?
If you’re like most college students, the answer could be no. A recent survey by lendedu.com found that fewer than 40% of current graduate and undergraduate students actually have a credit card in their name.
That’s partly due to credit cards simply being harder to get for college students, thanks to the CARD Act of 2009, which reigned in many of the industry’s student-focused marketing practices. For example, the law prohibits card issuers from mailing offers to people younger than 21 unless they opt in. It also bans giveaways of food, clothing and other gifts on campus and at college-sponsored events by credit card issuers. And it prevents a line of credit from being issued to adults younger than 21, unless they can prove a means to repay their loan or have a willing, adult co-signer who is 21 or older.
Still, the truth remains that the sooner you build credit the better your credit can be — if you make your payments on time and don’t carry too much debt, that is. That’s because the age of your credit history is one of the five key factors that make up your credit scores. It boils down to this: the older your accounts in good standing, the more points you’ll receive toward a higher credit score.
“Using a credit card is good from a convenience and security standpoint,” Thomas Nitzsche, media relations manager for ClearPoint Credit Counseling Solutions, said in an email. “The funds can’t be stolen the way cash can be, and if parents are giving an allowance it’s a convenient way to fund. Establishing credit at a young age can also help you build a good credit profile earlier on in life.”
That established credit score can come in handy when you want to move out of the dorms and into your own apartment because some landlords check credit scores. Even employers sometimes check credit scores, so having a good one upon graduation can be a leg up for your career.
What Should Students Do If They Want a Credit Card Before 21?
First, it’s good to keep in mind that, with the benefits of a credit card also come risks. Yes, you can build good credit if you are responsible, make all of your payments on time, don’t overspend and keep your balances low. But it’s also possible to rack up more debt than you can handle, which can take years to pay off. Or you may accidentally make a late payment, leading to late fees and penalty interest rates. (Our expert guide to credit cards for students is a great place to brush up on how to apply for and responsibly use a credit card.)
Nitzsche recommends that you also look specifically for a credit card that:
- Frequently provides your free credit score (on monthly statement and/or on-demand online);
- Forgives first late payment (an almost inevitable mistake that many people make, especially those managing finances on their own for the first time);
- Offers a rewards programs that matches your spending patterns and/or allows you to funnel rewards toward your student loan repayment.
Once you’ve done that, you’ll want to consider the following options.
Get a Co-Signer
Because you’ll be in school, you’ll likely not be working a full-time job, and that means you probably won’t have the income needed to get a credit card on your own. That’s where a co-signer comes in handy.
If your parents, guardian or another adult want you to have a credit card when you head off to college, they’ll likely be willing to co-sign on a card for you, so it could be worth asking. You’ll want to find a card with a low interest rate so you won’t be overly burdened if you need to carry a balance for a month or two.
Another option is for your parents, guardian or other adult to make you an authorized user on their existing credit card account. This will give you the added benefit of having their established account show on your credit report. Because it’s older than if you opened a new account, it will give your credit score a bit of a boost.
Get a Secured Credit Card
Another way around the income requirement is to apply for a secured credit card, which offers you a credit limit based on upfront cash collateral that you provide and that is held by the issuer. Because of the collateral, these cards don’t require a credit check and can be a great way to establish credit if the issuer reports your payments to all three major credit reporting agencies — Equifax, TransUnion and Experian.
Get a Student Credit Card
There are many credit cards that are geared toward helping students establish credit. You can find some of those in our roundup of the best student credit cards in America.
The credit limits on these cards tend to be lower than some other credit cards, helping ensure students who are managing their finances for the first time don’t get themselves into too much debt.
“One of the most frequent problems we see are consumers who don’t start working on their credit until the moment they need it,” Nitzsche said. “Good habits are also easier to form at a younger age, so if you can learn good credit usage young it’s a skill that will help you throughout your life.”
Before you sign up for any credit card, it is a good idea to look at the terms and conditions so you understand what you’re agreeing to. Once you find the right card for you, it’s a good idea to track your credit score as you go so you can see how your spending and payment habits affect it. You can pull your free annual credit reports at AnnualCreditReport.com or view two of your credit scores for free each month on Credit.com.