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Each month, Money.com is highlighting a different category of credit cards, to help you find the best one for your needs at a particular moment. As many Americans prepare to begin college or return to school (in-person or online), August is the perfect month to find and evaluate the best student credit cards.
What to Look for in a Student Credit Card
The vast majority of college students are young adults who are new to credit. Their primary goal should be to learn how to use a credit card responsibly while they build a strong credit history. Student credit cardholders should get in the habit of paying their bills on time and carrying very little, if any, debt.
After that, having a credit card will offer them a more secure and convenient method of payment than cash or checks, and more benefits and protections than a debit card. While rewards are offered by most student cards, earning rewards for spending more money shouldn’t be a priority, as it can lead to unnecessary purchases and encourage debt. Likewise, many student cards offer 0% APR promotional financing on new purchases and balance transfers, which can also lead to prolonged debt.
How We Chose the Best Student Credit Cards
We examined all of the student credit cards from major card issuers and ranked them based on the most important criteria, including interest rates, benefits, rewards and fees. Thankfully, all of the student credit cards currently offered have no annual fee, so you don’t have to worry about that. Some cards impose a 3% foreign transaction fee on transactions processed outside of the United States, but many cards have eliminated those unnecessary fees in recent years. (Few American students are studying abroad or traveling outside the country at the moment, so foreign transaction fees probably aren’t much of an issue.)
Winner: Bank of America Cash Rewards for Students
Why it won: From a strong sign-up bonus to valuable rewards and promotional financing offers, this card has all of the basics covered. It also features benefits like a free credit score and a strong mobile banking app to help students learn good credit habits.
Welcome Bonus: $200 in cash rewards after spending $1,000 within 90 days of account opening.
Rewards: Earn 3% cash back in the category of your choice, including gas, online shopping, dining, travel, drug stores, or home improvement/furnishings. You also earn 2% cash back at grocery stores and wholesale clubs and 1% cash back on all other purchases. Take note that the 3% and 2% cash back bonuses can be earned only on the first $2,500 in combined qualifying purchases each quarter.
Interest rates: Standard rate of 13.99% – 23.99%. 0% APR for 15 billing cycles on new purchases and balance transfers made within 60 days of account opening.
Benefits: Free FICO credit score and strong mobile banking app.
Fees: No annual fee, but there is a 3% balance transfer fee and a 3% foreign transaction fee.
Cons: This card has a 3% foreign transaction fee, while some cards have no fee on purchases made in a foreign currency. It also lacks some of its competitors more compelling benefits such as mobile phone insurance.
Runner-ups for Best Student Credit Card:
BankAmericard Travel Rewards® for Students
Like our top ranked Bank of America Cash Rewards, this card offers a strong welcome bonus. Instead of cash back, you earn 1.5 points per dollar spent and 25,000 points after spending $1,000 within 90 days of account opening. Points are worth one cent each towards travel rewards and a half-cent each towards cash back.
With this card, you earn rewards worth $15 in travel statement credits for every $1,000 you spent. But with the Bank of America Cash Rewards Card for students (described above), you could earn more. With the Cash Rewards card, students might earn $7.50 in cash back from making $250 in purchases from restaurants, $5 in cash back from making $250 of purchases at grocery stores, and another $5 in cash back from making $500 of other purchases that don’t qualify for a bonus, for a total of $17.50 in cash. That’s obviously more valuable that the $15 worth of travel statement credits you’d have earned with the BankAmericard for students.
This card also has a less generous introductory financing offer — 0% APR on purchases only for 12 months. And for many students, 2020 isn’t the best time to earn travel rewards.
Cons: Travel rewards aren’t as valuable as cash back, especially during times like these when travel is greatly restricted.
Discover it Student Cash Back
The Discover card is a great card for students as it offers low rates and fees, including a no-penalty interest rate and an automatic waiver of your first late payment fee. Plus this card offers competitive rewards, and Discover enjoys a reputation for offering outstanding customer service.
The Discover it Student Cash Back card offers 5% cash back on up to $1,500 spent each quarter at featured merchants and merchant categories, and 1% cash back on all other purchases. For example, from July to September of 2020, you’ll earn 5% cash back on charges from restaurants and anything you buy through PayPal. Discover also offers a CashBack Match that automatically doubles the rewards you’ve earned after your card’s first year.
Cons: Rotating categories that are eligible for bonus cash back can encourage students to make unnecessary purchases, just to earn rewards.