- 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.
