As a student, you’ll face certain limitations when trying to get your first credit card. If you’re under 21 or you don’t have a steady source of income, you’ll need a co-signer. Your co-signer (usually a parent) will agree to be liable for your debts, and, in exchange, the credit card company is willing to lend to you. If you have a co-signer, you have a number of good options for credit cards.
If you pay off your debts every month: If you don’t carry a balance month-to-month and never pay interest, you don’t need to worry about the interest rate. You can choose a credit card with great rewards, which gives 1-5% back on your purchases. Careful, though. Rewards credit cards tend to have higher interest rates than other cards, so if you can’t commit to paying your bills each month, you should consider other options.
If you carry a balance: If you tend not to pay off your debt each month, and accumulate interest, you should look for the lowest interest rate possible. You can get a card with 0% interest for an introductory period (usually 6-18 months), or you can choose a card with a low ongoing rate. Usually, credit unions (which are like small, not-for-profit banks) give far lower interest rates than regular banks do.
If you don’t have a co-signer: If you don’t have a co-signer, even if you have income, getting a credit card tends to be difficult. You have no credit history, so you’ll be considered a credit risk. Your best option is to look for a young adult or starter credit card, which is meant for building credit. Some credit unions and banks offer those types of card. If that’s not an option, you can look for a secured credit card. You have to post collateral, usually equal to your credit limit, which you’ll get back when you close the account. While you’ll probably have to pay an annual fee, you can usually find a card that waives the fee in the first year.
Now that you know generally what kind of card to look for, here are a few more details to consider:
- Does the card have an annual fee? Since it’s your first credit card, you’ll probably want to keep the account open for a while (having older accounts helps your credit score), and you don’t want to be bleeding annual fees years down the line.
- What’s the penalty APR (if any), and are there late fees? If your card has a penalty APR, you might be stuck with that higher interest rate for as many as 6 months after you miss a payment.