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Capital One Journey Teaches Students All About the Joys of High Interest Debt

March 3, 2011
Credit Cards
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Capital One just announced the launch of the shiny new Journey Student Rewards Credit Card, which they call a “credit card with training wheels.” And don’t get me wrong: this card does promote responsibility with a low limit, text and email payment reminders and a higher reward for on-time payments. But with most credit cards, including student credit cards, you can have good rewards and a high APR, or a low APR but fewer rewards. The Journey, unfortunately, provides neither. This is an invaluable lesson for first-time cardholders: know your options before you decide.

Middle-of-the-pack rewards

The Journey offers 1% cash back across the board. While it is true that some cards offer no cash back, other cards offer introductory rates, category-specific rewards or just higher rates overall. CapOne misleadingly offers a 25% increase on cash back for on-time payments, but 125% of 1% is still only 1.25%. A number of student cards have better rewards: our favorite, the Citi Forward student card, gives 5% back on music, movies, books and dining out, broad categories that include campus bookstores, fast food and most bars (rewards are capped at 75,000 points a year, or $15,000 spent in bonus categories). All that for no annual fee. Not feeling Citi’s ThankYou Points program? The Discover Student More gives 5% back in rotating bonus categories, up to $1,500 in purchases a quarter; 0.25% back on the first $3,000 in non-bonus spending; and 1% back thereafter. (For a breakdown of those cards as well as other top student cards, check out our list of the best student credit cards of 2012).

Scary-high APR

To be fair, a student isn’t likely to score the lowest APR around. But even for relatively risky students, the Journey’s APR is high. The minimum is 19.8%, compared to the nationwide student average of 13.42%. The two rewards cards mentioned above – the Citi Forward and Discover More – have more reasonable APRs, as well as 0% introductory APR periods. The Forward has a minimum APR (current as of December 2011) of 13.99%, offers 7 months of no interest on purchases, and actually reduces your APR by up to 2% if you use the card responsibly. The More has the same APR, and offers 9 months of no interest.

Foreign transaction fees – who needs ’em?

Most credit cards charge a foreign transaction fee – a 3% charge on all purchases you make abroad. That small charge can quickly add up: $2,000 in Italy is $60 on your bill, so waiving the fee is no small matter. The Journey pales against two other no-F/X fee cards: the previously mentioned Discover Student More (previously mentioned) and the MTV Visa, also from Capital One, which gives 5% back on entertainment, 2% on restaurants and 1% elsewhere. Via the Capital One website, “entertainment” includes:

Music Stores, Concert Tickets, Movie Theaters, Bowling Alleys, Amusement Parks, Video Rentals, Public Golf Courses, Tourist Attractions, Arcades, Live Theater, Professional Sporting Events, Video Game Rentals, Aquariums, Campgrounds, Boat Rentals

If you spend a lot on entertainment/dining out, you’ll find the MTV Visa a good deal. Even if you don’t, I’d be willing to bet that the Discover Student More earns more rewards than the Journey.

Learn on your own

The Journey’s main selling point is teaching financial responsibility. It offers low limits, financial education tools, and text or email payment reminders. These are all useful, helpful perks, but you may be better off using a search engine and a calendar. It always pays to be skeptical when a credit card company tries to sell you something that’s “for your own good.”

Instead of a card that features ho-hum rewards and a high APR, consider a card that excels in one or the other. For a standout in both categories, we recommend the Citi Forward Card for college students.