STUDENT CREDIT CARDS

It used to be that going to college meant a pocket full of graduation money and looking forward to a check in the mail from your parents.  Nowadays, starting college and getting a credit card go hand in hand.  If a student doesn't already have a credit card when they start college, then they will tempted at every turn with offers for free merchandise for filling out an application or mailboxes full of offers to apply for a credit card.  And, in today's society, it is almost necessary to have a credit card when you are in college. 

If you have to travel by air, then you need a credit card to book tickets and rental cars.  Even if a student has their own car, there is gas and repairs.  What parent wants to think of their child driving hundreds of miles without a credit card in case of emergencies? Long gone are the days of an extra twenty dollars stuffed in the back of your wallet "just in case."

The fact is credit card companies love to sign up college students.  Normal criteria for getting approved for a credit card is good credit history and proof of employment as a means of being able to pay your bill.  Yet, as a rule, college students have no credit history, no employment (or very little), and no track record of financial stability.  Basically that means they are more likely to spend out of control and rack up huge credit debt. Yet, credit card companies still woo college students.  The reasoning is two fold. 

First, they know that once you sign up an individual that person will likely remain a loyal customer for years to come.  When the student graduates and becomes gainfully employed, they will likely stay with the credit card already in their wallet. 

Second, credit card companies are in business to make money and when students run up large amounts of debt and don't meet the payments on time or in full they run up large finance charges and that means profit for the credit card company.  Also, many student credit card offers come with large annual fees, enrollment fees, and other charges buried in the small print of the contract. They bank on students being so excited at the idea of having credit that they don't take the time to read the fine print. 

Being at college is the first time that a young person operates as an adult—no rules, no curfew, no limits.  And, part of being an adult is having a plastic card with your own name imprinted on it.  But, before a student is given the reward and responsibility of a credit card, they should weigh the decision with some maturity.  Taking a class or doing a bit of independent study in finance would give you a working knowledge of credit and how it affects your life. 

Once a student has decided that they need a credit card, they need to consider how they are going to use it.  Traveling, supplies related to college classes, living expenses are all legitimate charges on a student credit card.  Using a credit card for shopping sprees, eating out, and other nonessential activities can lead to trouble down the road.  While whipping out the plastic feels so adult at the time, just remember that, as an adult, you will be responsible when the bill comes.  And, the bill will come. 

Also, running your credit card up to its limit and only paying the monthly minimum will mean you won't have credit available when you need it for a necessary expense.  Also, keeping your credit card close to its limit can damage your credit score.  Students should also beware of applying for and receiving multiple credit cards.  Having more than one card in your wallet is a temptation to use credit when you really can't afford it.  One of the main reasons that students drop out of college is because they can't afford it.  If you rack up huge debt in college, that debt and its consequences are going to follow you for years to come.

Now, having a credit card as a college student is not all bleak.  A student who uses their credit card prudently has a safety net for emergencies and that can alleviate stress in an already stressful time.  Also, using a credit card wisely can help a student establish a good credit score, positive credit history, and good spending habits.  This can help a person entering obtain other credit, such as auto loans and mortgages, as they move out into life beyond the college campus.

STUDENT CREDIT CARDS WITH NO CREDIT

A college student attempting to obtain their first credit card often have their first taste of the proverbial "catch 22."  They don't qualify for a credit card because they have no credit history; but, they can't establish a credit history because they don't have a credit card.  Often credit card companies treat an applicant with no credit the same as an applicant with bad credit.  A person with no credit has no credit records that the credit card company can assess to determine an applicant's level of risk.  For this reason, they will err on the side of caution and deny a no credit applicant just as they would one with bad credit.  It can become very frustrating and cause a student to opt for any opportunity presented to them for a credit card.  But, STOP. . .there are options available to obtain a credit card.  You just need to take your time, do your research, and be persistent.

• One of the best options for obtaining a student credit card when you have no credit history is a secured credit card.  In this situation, you place a deposit with a financial institution and they hold it as security against a credit card.  Often your limit will be equal or less than your deposit.  You have a credit card and the issuing company has your money as security if you don't pay the bill.  While these type of cards have a low credit limit, it still affords you all the other benefits of a standard credit card.  It allows you to build a positive credit history and after a short period of time (several months to six months) you can request an extension of your credit limit.  Continued good financial practices could lead the company to convert your card from secured to unsecured.

• If building a credit history is not a priority, then a student could opt for a prepaid credit card.  This allows them or their parents to put money in an account attached to the card.  The student can then use the card to access their money or make purchases.  There are set up fees and often there are fees for withdrawing money so be sure to read all the card requirements.  A student can make purchases without having to carry around large sums of money.  A prepaid credit card can also be useful to help a student adhere to a budget and learn good spending habits.  After all, once they have used all the funds they can't spend any more till more money is deposited into the account.  This could be a good pre-step to getting a credit card for a student who hasn't exhibited the best financial responsibility.

• Look for credit cards designed especially for college students.  Many companies tailor credit cards for college students and aggressively advertise and recruit applicants.  They realize the risk of credit card holders with no credit; but, they also know the upside.  They establish a customer loyalty and even if the bill goes unpaid they earn interest. 

• If you are having a difficult time obtaining a major credit card, you could try for a retail or gas credit card.  The downside is they usually have higher interest rates and you can only use them at a specific location.  The upside is that you can use the card just enough to establish credit history.  Make a small purchase or two during the month and pay the bill in full at the end of the month.  Several months of this should help up your credit score and help you get that MasterCard, Visa, American Express, or Discover.

• The most persistent offers a college student will get are from bad credit cards.  These are credit cards aimed specifically at people with bad credit histories.  The interest rates are usually much higher than industry standards and many have large annual fees, enrollment fees, and other fees listed in the terms of the contract.  If you opt to go this route, be very cautious.  Read all the fine print!  Like the store or gas credit cards, use this card sparingly and pay your bill in full to avoid the interest rates.  Once you have built a good credit history you can request the company lower your interest rate and suspend any fees.  Or, you can shop around for a better offer from another credit card company. 

• If all other options are not available or appealing, a student can be become an authorized user on a parent's credit card.  Of course, this depends on getting approval from the parental figure (which could be more difficult than the credit card companies).  Being on a parent's card will give a student financial security and access to funds when needed; but, it will also make the parent's responsible for all the purchases their child makes.  By the way, the parents will also have a detailed list of where their student/child spends their money.

These are some of the options available for student credit cards available to students with no credit.  A little persistence and patience will go a long way in helping a student not only obtain a credit card but establish a credit history that will benefit them for a lifetime.

PREPAID CREDIT CARDS

People who can not qualify for a traditional credit card can often turn to a prepaid credit card or secured card as an option.  Both prepaid and secured credit cards are often issued to people with no credit history or bad credit.  However, prepaid credit cards are not the same as a secured credit card.

PREPAID CREDIT CARDS – A prepaid credit card is actually more like a debit card. It involves paying an amount of money into an account that is linked to a prepaid credit card.  Then, as you use the card to pay for purchases, the amount you spend is deducted from the total in your account.  When you use all of the funds in your account, you can't use the card until more money is deposited into the account. 

Most prepaid credit cards are established through a credit company or retail store.  Banking institutions really don't have the need to offer prepaid credit cards since their bank cards attached to a customer's checking or savings accounts functions in the same manner.  Most prepaid credit cards will charge a small fee for setting up the account in the beginning, but check their policy for any additional fees so you know the cost before you set up an account. 

Another thing to consider when wanting to set up a prepaid credit card is deposits.  Some companies require you do a direct deposit while others let you make deposits as desired.  You will also want to know how quickly a deposit is credited to your account.  You don't want to deposit money expecting it to be available immediately if the company takes 24-48 hours to process a deposit. 

What’s the benefit of using a prepaid credit card? A prepaid credit card can be good for helping you to keep track of expenses and stay within budget.  However, if you are looking to improve your credit it probably won't help with that.  Since there is no credit limit or monthly billing, there is nothing to report to a credit bureau and thus your credit score is not affected by a prepaid credit card.  The only exception to this is if the company issuing the prepaid credit card reports your activity to the credit bureaus each month.  If you are trying to establish your credit or rebuild it then be sure to ask whether or not prepaid card activity is reported. 

SECURED CREDIT CARDS – A secured credit card is often thought of as the same type of credit card as a prepaid.  In fact, the terms are not interchangeable.  A secured credit card is actually a type of credit card.  It is most often used for people with no credit history or with a bad credit history.  A secured credit card is one in which the cardholder has to pay a security deposit up front to obtain a credit card.  This security deposit is held as collateral against the credit card in case the cardholder does not pay the monthly bill.  In this way, the cardholder gets use of a credit card and builds or rebuilds their credit while the credit card company has some "insurance" to cover the risk they are taking in offering credit to an unknown credit risk or a person known to have poor credit. 

When opening a secured credit card you want to look for one that has a low fee or startup costs; this will allow you to use more of your available funds towards the security deposit.  Next, you will want to look for a credit company that places your security deposit in an interest bearing account.  You don't want your money to just sit there; it might as well be making interest if you can't spend it.  You will also want to find a secure credit card with the highest credit limit possible.  Some cards will set your credit limit equal to the amount of your security deposit.  Others will only give you a credit limit equal to a percentage of your deposit—some as low as 50% of your deposit.  

Be sure to pay your bill on time each month and pay as much as possible.  At least try to pay more than the minimum amount due.  This will not only save you on finance charges but will help in improving your credit score.  A secured card will not improve your credit history if you pay the bill late or are constantly at the credit limit each month.  If the purpose of obtaining a secured credit card is to establish credit or improve your credit history, then you want to concentrate more on using the card responsibly than on racking up large credit debt. Responsible use not only can improve your credit but after six months of good use you can often request and receive an increase in your credit limit.

PREAPPROVED CREDIT CARDS

Most everyone has gotten a credit card offer in the mail that claims "you have been pre-approved to receive our credit card." It seems a little shifty that some faceless company is offering you unsolicited credit; but, still we are all tempted to fill out the application and await the arrival of the little plastic card that is our ticket to shopping happiness (until the bill arrives).  Before you get out the pen and begin filling out the paperwork, consider where it came from, what it is really offering, and what it is going to cost you.

WHAT ARE THEY AND WHERE DO THEY COME FROM?

Pre-approved credit cards are unsolicited offers sent to consumers to receive a credit card from a specific company.  Since you didn't request an application, you may wonder how an offer for a pre-approved credit card came addressed specifically to you.  There are three major credit bureaus that track consumers credit histories.  They are Trans Union, Equifax, and Experian. 

In order to stay competitive, credit card companies will offer credit to consumers that fit a model they have established.  Basically, they determine what type of consumer they want to target and then request a list of names from the credit bureau's databases that fit their parameters.  Then, they send out pre-approved offers to the consumers on the list hoping to hook a new creditor. 

Sometimes, credit card companies are looking for consumers with good credit scores hoping to lure them away from another company.  Other times they will target people with low credit scores with the hopes of enticing them to sign up for a pre-approved card with outrageously high fees and interest.  The hope is that a person desperate for a credit card will agree to severe costly terms. 

ARE THEY WORTH THE PAPER THEY ARE PRINTED ON?

The offer being sent is merely based on your name being pulled from a database because you met the credit card company's parameters. Also, by the time a pre-approved credit card offer has reached your doorstep it has been several months since your name was pulled from the credit bureau database and your financial situation could have changed.  All this means that a credit card would be foolhardy to simply offer you a credit card with no further information or investigation.  And, the credit card companies know this because the offer comes with an application and not a nice shiny new credit card. 

So, that pre-approved stamped on the envelope is not quite accurate.  It is more of an advertising ploy or gimmick.  Actually, a more accurate description would be "preliminary approval."  The credit card company has targeted you for an offer because you have meets some preliminary requirements they have to be a cardholder.  They now want you to fill out a detailed application and go through another credit screening to be sure your score hasn't drastically changed since they first got your name from the credit bureau database.  And, if you meet all the requirements of this second round and agree to the terms of their contract, you will be finally approved to receive their credit card.  If you don't mind being the target of their slightly deceptive advertising gimmick, then some of the offers you get may be reviewing. 

WHAT TO WATCH OUT FOR?

As enticing as these offers can seem, there are some things to watch out for.  You need to realistically consider why you got the offer?  If you have a good credit score and pay your bills on time, then you could be getting the offer because the company considers you a good candidate for their credit card.  In such a case, read offers looking for incentives and perks they will offer to entice you.  They may offer a lower interest rate or no interest on any balances you transfer from other cards.  They may offer rewards or cash back offers. 

On the other hand, if you have poor credit and a lot of debt, then they may try getting you to apply for a card with outrageous annual fees and huge interest rates and a very low credit limit.  In fact, some of these "pre-approved" offers have such high fees and such low credit limits that by the time they charge all the fees to your card you credit limit is down to $50 or less.  You will basically become a cash cow for the credit card company with no true benefits to you.  If you are honest with yourself about your credit status, then you can honestly evaluate the benefit of any pre-approved credit card.

LOW APR CREDIT CARDS

When shopping around for a credit card you need to be aware of what the card is going to cost you.  Obviously there is going to be a cost to you for using the credit card—otherwise the credit card company would not be in business.  Credit cards can sneak some pretty ridiculous fees into the small print of their contracts, so you should make it a habit to always read the entire document.  Also, be on the lookout for annual fees that can hit you for a loop if you are not cautious.  But, for now, let's examine the one cost that all credit cards have in common—the APR. 

All credit cards charge interest on any balance not paid in full when the bill arrives.  This interest rate is often referred to as the APR or the Annual Percentage Rate.  The percentage of interest charged is usually linked to the prime rate.  Credit cards can offer one of two rates to their customers.  They will offer a fixed rate that does not change from month to month or they will offer a variable rate that can change every month depending on how the market is doing.  You need to examine what type of rate a credit card is offering and determine which would be the best choice for you.  This can involve a little guesswork and even a bit of a gamble.  If you think interest rates are going to decrease, then you may want to gamble on a card with a variable rate, but, if the stress of such a gamble is too much for you, then just look for a card with a fixed interest rate. 

However, even a fixed rate credit card can change their interest rate. Keep in mind that if you are late in paying or go over your limit many fixed rate credit cards have clauses in the small print that allow them to increase your interest rate.  Also, be sure to check a credit card company's policy on changing their fixed rate. Some companies can change the rate whenever they want without giving you notice.  You will want to know how your interest rate is being calculated and the policy on giving notice of changes to avoid getting a huge, no so happy surprise on your monthly bill. 

While not specifically about the APR, another cost to you, if you intend to carry a balance from month to month, is how a credit card calculates its finance charges.  Most credit cards use an average daily balance. That is they total your daily balances and then divide the sum by the number of days in your billing cycle and base the finance charge on the final figure.  However, there are some credit cards that will divide the total of your daily balances by the number of days in two billing cycles which means higher finance charges.  While that is good for them, it would not be the best credit card for you.  Be sure to read the fine print about interest rates and finance charges before you apply for a credit card.

Getting back to the annual percentage rate, there are a number of credit cards that offer low interest rates.  When looking for a low interest credit card, there are a number of points to consider.  First, if you find a credit card that is offering a really low interest rate, you want to know what the trade off is going to be.  Most times when a credit card offers a good deal in one area they compensate for it in some other way.  For example, a low interest rate credit card could have a higher annual fee or not offer rewards and incentives.  Be sure that a few extra interest points are worth the trade off.  You may not mind paying an extra percentage point of interest if you get really good travel rewards and you are a frequent traveler. 

Also, most credit card companies will offer a really low or even zero percentage interest rate in their advertising.  This is another situation where you need to really read the small print.  That zero percent interest rate is usually an enticer to get you to sign up for the credit card and in the small print it has an expiration date.  What you really need to know is how long the how rate is valid for and what the APR will be after the honeymoon is over. 

If you already have a credit card with an APR that stings your wallet, there is still hope for you.  You know the phrase: "the squeaky wheel gets the oil."  Well, use it.  Try calling up your credit card company and asking for a lower interest rate. They just don't give it away to everyone, but those that ask often receive.  Just remember to be polite, explain that you like their credit card but need a reduction in the interest rate to continue using it, and be persistent.  If you don't get what you want the first time, then call another day.  A different representative may be more agreeable or ask to speak with a supervisor.  Many times they will give you a rate reduction as an incentive to keep your business.

EASY CREDIT CARDS TO GET APPROVED FOR

The benefits of having a credit card in your wallet are extraordinary.  It provides security, knowing that you have financial assistance for any situation.  It means that you can meet an unexpected expense.  It also means you can splurge or have a night out, every now and then.  Yet, the responsibility of credit cards can also be extraordinary.  There is a bill that comes every month that has to be paid on time.  Paying only the minimum amount due can mean poor credit ratings and higher interest rates.  Not managing your credit in a responsible way can mean a lifetime of debt and difficulty obtaining credit in future situations.  If you maintain good credit then the process of getting approved for a credit card is super easy.

• Apply for a credit card where you have your checking and savings account.  Since you have a financial history with them it will count in your favor when trying to get a credit card issued by them. 

• Apply for a credit card that has the benefits and/or rewards best suited to your needs.  If you have a good credit history, then getting approved for a premium card will be an easy process.  Just use one of the many websites on the internet that review credit cards and do side by side comparisons of cards suited to your needs to pick the best one. 

For many people though the credit card process has become more cumbersome due to bad credit history.  Most people start their credit journey with the best intentions.  They get their first card and use it for only small purchases and pay the bill on time in full.  Then, for some the temptation to spend takes over and they run up a large amount of debt they can't afford to pay in full each month. 

Or, some people, no matter how responsible, incur a large credit bill due to an emergency expense (such as a car repair bill), or they can't pay the bill due to a loss of income.  Even the best intentions can leave you with credit problems that seem insurmountable.  Still, there are credit cards that are easier than others to get approved.

• Apply for a credit card that is not one of the "best" rated cards.  When you do an internet search for credit cards, often the first one listed in a review list will be the most restrictive to bet approved for.  Instead, try applying for a card that is listed a little further down on the list.

• Apply for a credit card that has a higher Annual Percentage Rate (APR).  Just be aware that some of these credit cards can have interest rates as high as 25% to 30% and even higher. Credit card companies charge these ridiculous interest rates to provide themselves some security since they are dealing with an applicant that has a higher risk of not paying.  The extra interest rates guarantee they will make money no matter what happens.  It will cost you more but if used correctly it can help you improve your credit history.  Just remember to only make affordable purchases; that means purchases you can pay in full when the bill comes to avoid the high interest rates. 

• Apply for a credit card with a very low credit limit.  Some of these cards can have a credit limit as low as $250 which doesn't allow for large purchases; but, it does allow you to rebuild your credit rating.  With these types of cards you need to be aware of any extra fees they charge.   Often, they will charge a high annual fee, an enrollment fee, a processing fee, and numerous other fees.  They offer to charge the fees to your card and by the time you actually have the card in your possession you will only have $50 or less available on your credit limit.  Essentially, you start with a $200 plus debt to be paid.  Still, if you are desperate for a credit card this is a viable option.  And, if you pay the bill and keep your card in good standing for a period of six months you can request a higher credit limit and even lower fees or interest rates.  If they won't do it, you may have built up your credit enough to qualify for another credit card with better terms.

• Apply for a secured credit card.  This will require you making a deposit as collateral and your credit limit will only be as much as your deposit.  But, it will give you available credit when needed and work to rebuild a bad credit history.

While there are credit card options that can be easy to get approval, the process of rebuilding your credit is not easy; but, it will always be worth it.

CREDIT CARDS FOR PEOPLE WITH NO CREDIT HISTORY

Having no credit history can actually be a mark against you in the world of credit cards. While you have not run up enormous debt or missed payments, you have also not proven that you can manage a credit card responsibly by paying your balance due on time. 

For credit card companies, a person with no credit history is a giant question mark – a virtual unknown.  They use the information from the credit reporting bureaus to determine a person's level of risk when considering them for a credit card.  If you have no credit history then you have no information on record for them to consider.  They have no way of knowing what kind of financial sense you have.  Still, there are options for obtaining a credit card when you have no credit history.

Before you even try to get your first credit card, you should understand how credit operates.  It will help you in trying to get a credit card and help you in building a good credit history.  The first thing a credit card company considers when reviewing an application is the person's credit score.  A credit score is a point value that the credit reporting bureaus assign each person.  A credit score ranges from 600 to 800.  A person with no credit has a score of 600 not because they have practiced bad credit habits but because they have no credit activity.  The better a person's credit activity the higher their score.  Understanding their scoring system helps you realize that good credit is something earned, not just some unrelated number assigned to a person. 

Likewise, a person with bad credit practices is penalized with a low credit score.  Therefore, getting approved for a credit card is the first step towards building up your credit score.  The next steps are based on your ability to use your credit card wisely.  Using a credit card wisely and building a good credit rating and history will help you beyond the world of credit cards.  Good credit card practices can help you get approved for other forms of credit, such as auto loans and home mortgages.  Good credit ratings can also qualify you for lower interest rates on these types of loans. 

Obtaining a credit card with no credit history will most likely have some extra requirements beyond the standard credit card offered to those with good credit.  Just consider the following three issues when shopping for a credit card:

1. APR – Most credit card offers to someone with no credit will have a higher interest rate than the industry standard.  Some of these interest rates could be as high as 30%.  Just remember if you only use your card for small purchases and pay the bill in full on time then you won't be buried by high interest rates. Just use the card as a tool towards the goal of building good credit.  Once you have raised your credit score you can obtain a credit card with lower rates.
2. ANNUAL FEES – For someone with no credit history, an initial credit card offer will require paying an annual fee for use of the credit card.  These fees normally average about $50.  Be watchful for cards whose fees greatly exceed this norm. 
3. CREDIT LIMITS – A beginning credit card will usually have a very low credit limit. The limit can be as low as $250.  This low limit protects the credit card issuer if the applicant turns out to be a bad credit risk.  However, good credit practices can mean that after six months you can request and usually receive a credit limit increase.

There are numerous credit card offers on the internet that consider those with no credit history.  You can try for an unsecured card, a secured card, or a bad credit credit card.  The following five credit card have offers that seem favorable towards those with no credit:

• Capital One Secured Master Card
• First Premier Bank Classic Credit Card
• HSBC Bank of Nevada's Orchard Bank Visa Card
• HSBS Bank of Nevada's Orchard Bank Classic MasterCard
• Centennial Classic Credit Card

These are not the only financial institutions that consider those with no credit history for credit cards.  They are just a starting point for finding a credit card that will help a person with no credit history develop some positive credit.  If these offers don't appeal to you or meet your needs, then continue shopping around and find that card that meets your needs and is willing to give you your chance to start on the road to having a good credit history.