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Best Student Credit Cards – October 2020

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Best Student Credit Cards – October 2020

*Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It may not have been reviewed, approved or otherwise endorsed by the credit card issuer. This site may be compensated through a credit card issuer partnership.

This article was last updated Oct 01, 2020. Terms and conditions may have changed. For the most accurate information, please consult the issuer website.

As if college exams and the post-graduation job hunt aren’t enough to think about while you’re a college student, there’s another thing that should be on your radar — building a great credit score.

A good credit score can help you get approved for your first apartment lease or the best interest rates on a car loan. The easiest way to build credit during college is to open a student credit card, although you must be at least 18 years old and have a source of income to qualify.

We’ve chosen the best student credit cards through a review of cards available on CompareCards and from major issuers. We highlight the pros and cons of each card, and will also answer some common questions about student cards.

Compare the best student credit cards

 Discover it® Student Cash BackBank of America® Cash Rewards for StudentsJourney® Student Rewards from Capital One®Deserve® EDU Mastercard for StudentsCiti Rewards+℠ Student Card
Best forStudents who are willing to activate rotating categories to earn a high cashback rate.Students who spend heavily in one of the available 3% cashback categories.Cardholders who want flat-rate rewards without worrying about categories.International students studying at a college in the U.S.Students who frequently make small purchases that will activate this card’s rounding-up feature.
Sign-up bonus Unlimited Cashback Match – only from Discover. Discover will automatically match all the cash back you’ve earned at the end of your first year! There’s no minimum spending or maximum rewards. Just a dollar-for-dollar match. $150 cash rewards bonus after making at least $500 in purchases in the first 90 days of your account opening.No bonus.No bonus.Earn 2,500 bonus points after you spend $500 in purchases with your card within 3 months of account opening; redeemable for a $25 gift card at thankyou.com.
RewardsEarn 5% cash back on everyday purchases at different places each quarter like grocery stores, restaurants, gas stations, select rideshares and online shopping, up to the quarterly maximum when you activate. 1% unlimited cash back on all other purchases - automatically.Earn 3% and 2% cash back on the first $2,500 in combined choice category/grocery store/wholesale club purchases each quarter, then earn 1%.1% cash back on all purchases; 0.25% cash back bonus on the cash back you earn each month you pay on time.1% unlimited cash back on ALL purchases.2X ThankYou® Points at Supermarkets and Gas Stations for the first $6,000 per year and then 1X Points thereafter. Plus, earn 1X Points on All Other Purchases.
Annual fee$0$0$0$0$0
Foreign transaction feeNone3%NoneNone3%
Regular purchase APR12.99% - 21.99% variable16.24% - 26.24% variable26.99% (variable)18.74% variable14.49% - 24.49% (variable)

While specifics vary from card to card, some of the options for redeeming rewards earned with the student cards in this article include:

  • As a statement credit
  • In the form of a paper check
  • As a deposit to a bank account
  • For gift cards

While some cards and redemption options allow cardholders to redeem rewards with no minimum, other cards or redemption choices may require a minimum amount — typically $25.

51% of College Students Have a Credit Card, and Nearly 1 in 5 Regret It

From expensive textbooks and meal plans, to spring break trips and happy hours, there’s a lot to spend money on as a college student. Add credit cards to the mix, which can allow students to make purchases they may not actually be able to afford, and things can get dicey quickly.

“The truth is that credit cards and college-aged folks are a volatile mix,” said Matt Schulz, chief industry analyst at CompareCards. “With online shopping, in-app purchases, mobile payments and more, it’s just so easy to spend. Combine that with the lack of experience and money know-how in so many folks that age and things can get out of hand in a hurry.”

With this in mind, CompareCards surveyed more than 1,000 college students about credit cards, revealing some concerning trends among them and their peers. 

Key findings

  • Just over 1 out of 2 college students (51%) have a credit card, and nearly 1 in 5 (19%) regret getting one. 
  • Half of all college-aged credit cardholders have had credit card debt. Included in that number are 3 in 10 students who are currently in debt, at an average of $1,763.
  • Basic expenses, such as groceries or bills, are the primary source of college students’ credit card debt. At the same time, 22% of indebted students cited shopping as the reason for their debt, while 17% blamed travel.
  • Many student cardholders have potentially harmful credit card habits:
    • 46% have made a late payment.
    • 30% currently are carrying credit card debt
    • 20% charge their card when they don’t have enough money to cover a purchase with cash or a debit card.
  • 33% of students think it’s too easy for young adults to open a credit card. Case in point: 79% of all college students have received promotional mailers inviting them to apply for a credit card, and 16% have even been offered a credit card while on campus.

About half of college students have a credit card, leading to debt and regret for some

Just over 1 out of every 2 college students have a credit card, and 19% of those that do regret getting one. That regret could stem from debt, as half of all college-aged credit cardholders have had credit card debt. Included in that number are 3 in 10 students who currently are in debt at an average of $1,763.

Schulz said he’s “not at all surprised” that a large number of college students have credit card debt, admitting that he, too, racked up debt at that age. 

When looking at the sources of students’ credit card debt, two main categories emerge. Basic expenses such as groceries or bills are the primary source of college students’ credit card debt, while medical costs also contributed. 

Though some of this debt could have been avoided by budgeting or finding additional sources of income, it’s true that sometimes it’s just not possible to cover basic needs without taking on debt. After all, if you have to choose between eating dinner or adding another $20 to your card, you’ll probably pick the meal.

At the same time, many indebted students cited activities such as shopping, travel, and going out with friends as the culprits leading to their debt. Racking up charges for a lifestyle you can’t afford is a lot different than just trying to make ends meet, and if swiping your card becomes a habit, your balance could grow in a hurry. 

Some student cardholders have harmful credit habits

In addition to racking up unnecessary debt, many student cardholders aren’t always treating their credit cards responsibly. What’s especially worrying is that almost half have paid their bill late, incurring interest charges and penalty APRs, and hurting their credit score in the process.

“Paying your bills is not optional,” Schulz said. He urges students with credit cards to always at least pay the minimum balance each month, if not the entire balance. 

“Missing payments will wreck your credit in a hurry and have the potential to haunt you for years. After all, there’s very little that’s more expensive than crummy credit,” he added. Late payments stay on your credit reports for up to seven years.

Twenty percent of student credit cardholders noted they often charge their card when they don’t have enough money to cover the purchase otherwise. Ideally, students wouldn’t treat credit cards any differently than they would cash or debit, meaning only charging the card when they can pay off the purchase immediately. That can allow you to earn rewards and establish a good track record as a responsible credit user while avoiding debt. 

Of course, it’s not always possible to avoid an emergency. For example, 18% of college students with a credit card said a coronavirus-related job loss has forced them to turn to credit more often than usual. Still, using credit cards as a Band-Aid for an empty bank account should be a last resort.

Most students noted easy access to obtaining credit cards, but many desire additional education

About 80% of all college students said they had received promotional mailers inviting them to apply for a credit card. Additionally, a full 16% of students have even been offered a credit card while on campus.

Thirty-three percent of students think it’s too easy for young adults their age to open a credit card.

Unfortunately, that ease of access is often coupled with a lack of credit education. More than 1 in 7 student cardholders said they were not educated enough about credit cards when opening their account, which could contribute to the large percentage of student cardholders who are in debt or have a track record of late payments.

Only 22% of college students stated they learned about how credit cards work either from their parents or in school prior to starting college. The vast majority (47%) learned about them only from their parents. Even more concerning, 14% said neither their parents nor their school taught them about how to responsibly manage credit cards.

How college students can become responsible card users

Getting your first credit card often comes with a learning curve, especially for those who don’t know very much about them to begin with. The good news is there’s no shortage of free resources on sites like CompareCards to help you along the way.

If you have a credit card

  • Set up autopay. Schulz notes this should be one of the first things anyone with a credit card does. “Nothing’s more important to your credit score than your ability to pay your bills on time, and autopay makes that easier than ever,” he said. You can do this easily on your card issuer’s website. Ideally, you’d set up your auto payment to cover the entire balance, but the minimum payment works, too. At the very least, you’ll avoid late fees and a derogatory mark on your credit report.
  • Make a budget. In many cases, college students don’t have a whole lot of money coming in, which makes tracking spending all the more important. “There’s just no way to make a meaningful plan to tackle credit card debt if you don’t know exactly how much money is coming in and going out of your household each month,” said Schulz. He recommends students take a week and note all of their expenses even that $1 late-night vending machine snack as well as any money that comes in. Knowing what you have and what you spend is the first step toward creating healthy financial habits.
  • Don’t spend more than you can afford. Once you set up a budget, stick to it! That’s easier said than done, but it’s so important. Make sure all of your needs like food, housing and car insurance are covered before spending on your wants.

If you’re contemplating opening a credit card

  • Consider a secured card. These cards require the cardholder to put down a deposit that serves as their credit limit, and can be a good option for young adults with little to no credit history. Once you’ve established a good track record with the issuer, you can often transition to an unsecured card with a higher limit and get your deposit back.
  • Read the fine print. Read carefully over the terms and conditions of any credit card you apply or are approved for. This is where you’ll find important information on missed payments, cash advances, using the card abroad, etc. You should also take note of the credit limit and payment due date.
  • Use the internet to your advantage. Personal finance sites like CompareCards offer plenty of guides, reviews and side-by-side comparison tools to help you make an informed decision about whether a credit card is right for you. 

The bottom line

Credit cards are an important first step in establishing a good credit history so you’re able to do things like rent an apartment or buy a car in the future. At the same time, late payments and a sky-high balance will stick with you for quite some time. College students with credit cards should try their hardest to pay every bill on time and in full, whenever possible.

Methodology

CompareCards commissioned Qualtrics to conduct an online survey of 1,050 full-time college students. The survey was fielded July 17-21, 2020.

Best student card for cash back: Discover it® Student Cash Back

  • 0% intro for 6 Months*

  • Earn 5% cash back at different places each quarter up to the quarterly maximum, when you activate*

  • 12.99% - 21.99% Variable*

Highlights
  • INTRO OFFER: Unlimited Cashback Match – only from Discover. Discover will automatically match all the cash back you’ve earned at the end of your first year! There’s no minimum spending or maximum rewards. Just a dollar-for-dollar match.
  • Earn 5% cash back on everyday purchases at different places each quarter like Amazon.com, 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.
  • Good Grades Rewards: $20 statement credit each school year your GPA is 3.0 or higher for up to the next 5 years.
  • Get 100% U.S. based customer service & get your free Credit Scorecard with your FICO® Credit Score, number of recent inquiries and more.
  • Freeze It® on/off switch for your account that prevents new purchases, cash advances & balance transfers in seconds.
  • Get an alert if we find your Social Security number on any of thousands of Dark Web sites.* Activate for free.
  • No annual fee. No late fee on first late payment. No APR change for paying late.
  • Discover is accepted nationwide by 99% of the places that take credit cards.
  • 0% intro APR on purchases for 6 months, then the standard variable purchase APR of 12.99% - 21.99% applies.
  • See Rates & Fees

See additional details for Discover it® Student Cash Back

More Info

Why we like it: As long as you remember to activate the quarterly categories, this card offers one of the highest cashback rates you can earn with a student card.

Earn 5% cash back on everyday purchases at different places each quarter like grocery stores, restaurants, gas stations, select rideshares and online shopping, up to the quarterly maximum when you activate. 1% unlimited cash back on all other purchases - automatically.

There’s also a unique sign-up bonus for new cardmembers. Unlimited Cashback Match – only from Discover. Discover will automatically match all the cash back you’ve earned at the end of your first year! There’s no minimum spending or maximum rewards. Just a dollar-for-dollar match. For example, the maximum cashback potential if you max out the $1,500 cap in the 5% categories each quarter will net you a total of $600 in cash back the first year thanks to the match.

Plus, if you maintain a 3.0 GPA or higher during the school year, you can earn a $20 Good Grade Reward statement credit. This benefit is valid for up to five consecutive years from the date your account is opened.

Other benefits: The Discover it® Student Cash Back’s benefits include:

  • Intro 0% for 6 months on purchases. Then, a 12.99% - 21.99% variable APR will apply.
  • Free access to your FICO Score.
  • Free monitoring of the dark web for your Social Security number (after you sign up).
  • Freeze or unfreeze your card online.

What to watch out for: There’s a spending limit on the 5% cashback rate. Once you spend $1,500 in the current quarter’s category, your earning rate drops to 1% until the next quarter.

Also, you must activate the 5% categories each quarter, otherwise you’ll earn just 1% cash back.

Read our review of the Discover it® Student Cash Back.

Best student card for gas: Bank of America® Cash Rewards for Students

Why we like it: This is a flexible card with a generous cashback rate. Earn 3% and 2% cash back on the first $2,500 in combined choice category/grocery store/wholesale club purchases each quarter, then earn 1%. Categories you can choose for your 3% earnings include:

  • Gas
  • Online shopping
  • Dining
  • Travel
  • Drug stores
  • Home improvement/furnishings

Other benefits: Benefits with the Bank of America® Cash Rewards for Students include:

  • $150 cash rewards bonus after making at least $500 in purchases in the first 90 days of your account opening.
  • On purchases, 0% Introductory APR for the first 12 Statement Closing Dates. After, a 16.24% - 26.24% variable APR applies.
  • On balance transfers, 0% Introductory APR for the first 12 Statement Closing Dates following the opening of your account for transactions made within 60 days of opening your account. After, a 16.24% - 26.24% variable APR applies.
  • Free access to your FICO Score.

What to watch out for: Beware the 3% foreign transaction fee. If you plan to study abroad, leave this card at home and get a card that charges no foreign transaction fee instead.

Read our review of the Bank of America® Cash Rewards for Students.

Best student card for flat-rate rewards: Journey® Student Rewards from Capital One®

Why we like it: There’s no fuss with different cashback rates for different purchase categories with this card. Earn 1.25% cash back on everything — 1% cash back on all purchases; 0.25% cash back bonus on the cash back you earn each month you pay on time.

Other benefits: Benefits with the Journey® Student Rewards from Capital One® include:

  • Lock your card using the Capital One mobile app.
  • Auto rental collision damage waiver.
  • Travel accident insurance.
  • Extended warranty.
  • Check your credit score with CreditWise from Capital One (note this is free whether or not you’re a Capital One cardholder).

What to watch out for: There are cards that offer a higher cashback rate.

Read our review of the Journey® Student Rewards from Capital One®.

Best student card for international students: Deserve® EDU Mastercard for Students

  • 1% unlimited cash back on ALL purchases

  • Receive one year of Amazon Prime Student on Deserve after your first purchase with your new Deserve EDU Mastercard (Lifetime Value of $59).

  • Build a positive credit history with responsible use

Highlights
  • Receive one year of Amazon Prime Student on Deserve after your first purchase with your new Deserve EDU Mastercard (Lifetime Value of $59).
  • Earn 1% Cash Back on all purchases with your Deserve EDU Mastercard. Once approved, you'll automatically start earning cash back on all purchases.
  • Feel secure with cell phone protection up to $600.
  • No deposit required. No annual fees.
  • No international transaction fees on purchases abroad so you can travel with confidence.
  • No Social Security Number required for international students to apply.
  • Refer A Friend Program: Refer anyone to Deserve using your personal referral code. Upon approval, card activation and use, you'll receive $30 and so will your referral. Referral bonuses are unlimited!
  • Manage and track your spending, set automatic payments and securely freeze your card all through one easy to use app.
  • See if you prequalify with no impact to your credit score in minutes.
  • Deserve Mastercards are issued by Celtic Bank, Member FDIC.
  • Enjoy Mastercard Platinum Benefits intended to make your life easier like Mastercard ID Theft Prevention™ and Master Rental®.

See additional details for Deserve® EDU Mastercard for Students

More Info

Why we like it: Whether you’re an American student with no credit history or a foreign student studying at a U.S. college, the Deserve® EDU Mastercard for Students is aimed at applicants with good/fair/limited credit, and doesn’t require an SSN number for international students to apply — though you won’t build credit until you link one.

You’ll also earn 1% unlimited cash back on ALL purchases.

Other benefits: Benefits with the Deserve® EDU Mastercard for Students include:

  • Check if you prequalify without hurting your credit score.
  • Up to $59 reimbursement for an Amazon Prime Student subscription.
  • Cellphone protection up to $600 per claim (there’s a $50 deductible).
  • Collision damage waiver.

What to watch out for: 1% cash back is a subpar rewards rate.

Read our review of the Deserve® EDU Mastercard for Students.

Best student card for small purchases: Citi Rewards+℠ Student Card

Why we like it: Cardholders earn 2X ThankYou® Points at Supermarkets and Gas Stations for the first $6,000 per year and then 1X Points thereafter. Plus, earn 1X Points on All Other Purchases. The best part about this card? Rewards are rounded up to the nearest 10 points.

For example, if you spend $1 on a bag of chips, you earn 10 points, and if you spend $12 on lunch, you earn 20 points. This feature is great for those who make numerous small purchases.

Other benefits: Benefits with the Citi Rewards+℠ Student Card include:

  • Earn 2,500 bonus points after you spend $500 in purchases with your card within 3 months of account opening; redeemable for a $25 gift card at thankyou.com.
  • Enjoy an intro 0% for 7 months on purchases. After, a 14.49% - 24.49% (variable) APR applies.
  • Receive 10% points back on redemptions up to 100,000 ThankYou Points per year.
  • Get special access to concerts, sporting events and more with Citi Entertainment.

What to watch out for: There’s a 3% foreign transaction fee when you make purchases outside the U.S., so leave this card at home if you have study abroad plans.

Read our review of the Citi Rewards+℠ Student Card.

Other student credit cards to consider

Bank of America® Travel Rewards for Students

Why we like it: For students who want a travel card with decent flat-rate rewards, the Bank of America® Travel Rewards for Students is a good choice. Earn unlimited 1.5 points for every $1 you spend on all purchases everywhere, every time and no expiration on points.

The sign-up bonus is also valuable, though its spending requirement is high. Earn 25,000 bonus points if you make at least $1,000 in purchases in the first 90 days of your account opening.

Other benefits: Benefits with the Bank of America® Travel Rewards for Students include:

  • On purchases, get an 0% Introductory APR for the first 12 Statement Closing Dates. After, a 17.24% - 25.24% variable APR applies.
  • Free access to your FICO Score.

What to watch out for: Though points redeemed for travel are worth $0.01 each, points redeemed for cash back are worth less — only $0.006 each. Point value for gift cards varies.

Read our review of the Bank of America® Travel Rewards for Students.

Discover it® Student chrome

  • 0% for 6 months

  • 2% cash back at Gas Stations and Restaurants on up to $1,000 in combined purchases each quarter. 1% unlimited cash back on all other purchases - automatically

  • 12.99% - 21.99% Variable*

Highlights
  • INTRO OFFER: Unlimited Cashback Match – only from Discover. Discover will automatically match all the cash back you’ve earned at the end of your first year! There’s no minimum spending or maximum rewards. Just a dollar-for-dollar match.
  • Earn 2% cash back at Gas Stations and Restaurants on up to $1,000 in combined purchases each quarter. Plus, earn unlimited 1% cash back on all other purchases – automatically.
  • Good Grades Rewards: $20 statement credit each school year your GPA is 3.0 or higher for up to the next 5 years.
  • Get 100% U.S. based customer service & get your free Credit Scorecard with your FICO® Credit Score, number of recent inquiries and more.
  • Freeze It® on/off switch for your account that prevents new purchases, cash advances & balance transfers in seconds.
  • Get an alert if we find your Social Security number on any of thousands of Dark Web sites.* Activate for free.
  • No annual fee. No late fee on first late payment. No APR change for paying late.
  • Discover is accepted nationwide by 99% of the places that take credit cards.
  • 0% intro APR on purchases for 6 months, then the standard variable purchase APR of 12.99% - 21.99% applies.
  • See Rates & Fees

See additional details for Discover it® Student chrome

More Info

Why we like it: Earn 2% cash back at gas stations and restaurants on up to $1,000 in combined purchases each quarter. 1% unlimited cash back on all other purchases - automatically.

Plus, there’s a sign-up bonus for new cardmembers. Unlimited Cashback Match – only from Discover. Discover will automatically match all the cash back you’ve earned at the end of your first year! There’s no minimum spending or maximum rewards. Just a dollar-for-dollar match.

And finally, you’re able to earn the same Good Grade Reward as the Discover it® Student Cash Back card.

Other benefits: The Discover it® Student chrome’ benefits include:

  • An intro 0% for 6 months on purchases. Then, a 12.99% - 21.99% variable APR applies.
  • Free access to your FICO Score.
  • Freeze and unfreeze your card online in case you misplace it.
  • Free monitoring of the dark web for your SSN once you sign up.

What to watch out for: There’s a quarterly limit on the 2% cashback rate. After spending $1,000, your earning rate will drop down to 1% until the next quarter.

It would take $250 a month in combined gas and restaurant purchases to hit the spending limit, but for students who drive a lot and dine out frequently, it’s worth bearing in mind.

Read our review of the Discover it® Student chrome.

Wells Fargo Cash Back College Visa® Card

Why we like it: Cardholders earn 3% cash rewards on gas, grocery, and drugstore net purchases for 6 months, and 1% cash rewards on other purchases. Note that there’s a spending limit of $2,500 on the 3% rate. If you hit the cap, you’ll have earned $75 in cash back.

Other benefits:

  • 0.00% introductory APR for 6 months on purchases. After, a 13.40% – 23.40% variable APR applies.
  • 0% introductory APR for 6 months on balance transfers. After, a 13.40% – 23.40% variable APR applies.
  • Get free access to your FICO Score from your Experian credit report.
  • Learn about financial topics with Wells Fargo’s credit education website (note that this is free to access even if you’re not a Wells Fargo cardholder).

What to watch out for: After you hit the $2,500 spending limit or after six months, whichever happens sooner, this card drops to a subpar cashback rate of 1% on all purchases.

Also, you must have an existing relationship with Wells Fargo to apply online. Otherwise, you can only apply for the Wells Fargo Cash Back College Visa® Card in a physical bank branch.

Read our review of the Wells Fargo Cash Back College Visa® Card.

Student credit card FAQs

Should college students have credit cards? Legally, you must be 18 years old and have a source of income to be able to qualify for a credit card. For college students who meet these requirements, a credit card can be a useful tool to build credit — which will be important after graduation for renting an apartment, getting a car loan and even for some job applications.

How do you build credit while in college? Get a credit card and follow these best practices:

  • Use your card regularly. It’s important to show regular charging and repayment behavior that gets reported to the credit bureaus. That means using the card for small purchases and paying the balance in full every month. You can even set up autopay so you never forget to pay on time.
  • Make timely payments. Paying on time is the most important action you can take to build good credit history, accounting for 35% of your FICO Score.
  • Keep your balance under control. Avoid maxing out your card. Your utilization is how much of your credit limit you’re using at a given time and accounts for 30% of your credit score. Personal finance experts recommend using no more than 30% of your limit — for example, on a credit card with a $200 limit, spend no more than $60 each month on the card.

To make sure your credit is on the right track, it’s good to keep an eye on your credit score. There are a variety of ways to check your score for free.

Read: The 5 Factors That Affect Your Credit Score

If you aren’t ready for the responsibilities of having your own credit card, another way to build credit is to ask a family member to add you as an authorized user on one of their cards. However, make sure it’s a card with a good payment history and without a lot of debt.

What’s the difference between a student card and a secured card? Student cards are geared toward applicants who are college students. Secured cards are available to any applicant, college student or otherwise. And secured cards require that you submit a security deposit to the credit card issuer, protecting them in case you don’t pay back what you charge to the card. Typically, the amount of your security deposit will become your credit limit.

Do student credit cards earn rewards? Many student cards may indeed earn cash back or points. However, with a student card, it’s better to focus on building credit than earning rewards. You don’t want the temptation of rewards to encourage overspending and lead to debt.

Can I get a credit card with no credit history? While the credit cards with the best benefits and rewards typically require good or excellent credit history, there are cards for people with no credit.

Cards designed for college students, like the cards listed in this article, are a good place to start. You may also wish to review our recommendations for the best secured credit cards.

What are the best starter credit cards? Many of the cards listed in this article are fine choices for your first credit card. For more options, see our list of best credit cards for beginners.

Be aware that no card offers a guaranteed approval. When you apply, the issuer will consider a variety of factors, including your income, how much debt you’re carrying and your credit score.
Credit scores for young adults tend to be low, and a short credit history means potential creditors and lenders don’t have much information on timely payments. CompareCards researchers looked at the anonymized credit reports of more than 250,000 cardholders between the ages of 18 and 22 and found that having an active credit card or being an authorized user on someone else’s credit card can make a substantial difference in their credit scores.

Credit cards boost credit scores of college-age adults

Key takeaways

  • College-age adults (ages 18 to 22) have an average credit score of 621. Borrowers with this credit score – just outside the subprime range – could find it challenging to qualify for traditional mortgages or other loan products.
  • Having a card in one’s own name raises the average score by 16 points, or 3%.
  • Being an authorized user on someone else’s card has an even more dramatic effect, raising scores by an average of 25 points.
  • Having a credit card while also being an authorized user on another card gives an average boost of 20 points.
  • About 45% of young adults don’t have a credit card, and only 2% are authorized users on someone else’s card.

Building a good credit profile has long-term financial impact

A good credit score can offer advantages that last through a person’s lifetime. It can be the difference to having various kinds of credit at critical points, from buying a car to get to work to building long-term wealth through home equity.

Research from our parent company, LendingTree, shows that raising a credit score can save hundreds of dollars a month and tens of thousands in interest payments over the lifetime of different loan types. Those savings can go to other things with long-term value, such as:

  • Saving for future large purchases
  • Funding moves for better opportunities
  • Growing retirement funds
  • Paying off college debt
  • Investing in stocks or businesses
  • Building emergency funds

Low credit scores can restrict people from renting apartments and utilities can require deposits. Insurance companies can charge more to people with low credit scores, which adds up to paying more for what others have.

There’s also a cyclical effect: Having less cash on hand because of higher monthly payments could mean missing payments when money is tight, which in turn lowers credit scores, which in turn makes future borrowing more expensive.

How credit cards can help credit scores

Credit scores are designed to tell lenders whether a person is likely to pay off their loans or credit in a timely manner, generally using past behavior as an indicator of future behavior. If someone doesn’t have a credit history, they haven’t proven themselves as reliable yet.

This is why being an authorized user on someone else’s card showed an even bigger boost in our study sample. If a young adult is an authorized user on their parent’s card, they can get the good history that comes with how their parent handled that account.

Methodology

Researchers analyzed more than 250,000 anonymized July credit reports of young adults between the ages of 18 and 22 to determine the percentage who:

  • Had an active credit card
  • Had at least one active card in their name/is primary cardholder
  • Were an authorized user on at least one credit card
  • Had an active card (primary cardholder) and were an authorized user on at least one credit card

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