With the onset of fall, it is time for many college-bound students to go off and live independent of their parents. Many of these young adults would like to have their first credit card. Prior to 2009, receiving one or more credit card offers without any need to qualify was a rite of passage for many college students.
The Credit Card Accountability, Responsibility and Disclosure (CARD) Act of 2009 changed the rules. Now, persons under the age of 21 must to demonstrate the ability to repay credit card debt or have a parent, or other person over the age of 21, co-sign the application.
In the past, credit card issuers would entice naïve students into applying for credit cards by offering them free gifts. The CARD Act has banned this type of activity. In addition, universities must disclose if they have marketing agreements with credit card companies.
Interest rates and credit limits
When applying for a first credit card, expect card issuers to charge you higher interest rates. To credit card companies, you represent a greater risk to default on monthly payments because you have yet to prove your creditworthiness. You can bypass higher rates by simply getting into the habit of paying off your credit card balance in full each month.
Generally, a first credit card will usually have a low line of credit or credit limit somewhere between $300 and $3,000. Starting students out with a low credit limit allows them to learn how to manage credit effectively. In addition, it prevent young adults from accumulating a hefty debt obligation and quickly getting in over their head.
First credit card offerings
Here are three of the best credit cards for college students:
1. Discover It Student Card – Offered by Discover Financial, you can earn 5% cash back on various categories—gasoline, dining , movies and other items– that rotate every quarter. For the first six months you enjoy a 0% APR on all purchases.
2. Journey Student Rewards from Capital One – Issued by Capital One, this card gives you 1% rebate or cash back on all purchases. You can receive an addition 25% rebate on the cash back you earn each month by paying your bills by the due date. There is no limit on what you can earn and rebates do not expire. This card does not have a balance transfer fee.
3. Citi Forward Card for College Students – The card has a 0% introductory rate for the first seven months. After the intro period, the regular APR will be 13.99%-23.99% depending on your credit score. Citi Forward Card for College Students give cardholders back 5 points for each dollar spent in the following categories: book stores, restaurants, record stores, video rental stores and movie theaters. Receive 1 point back per dollar spent on other purchases.
A first credit card provides you a line of credit and ensures you have access to cash You’re your student credit card to build a good credit profile, which can help you qualify for the best rates in later in life–when you apply for a home mortgage , car loan or other credit.