How do student credit cards work?

You’re at a point in life that comes with some pretty great firsts. And one of those might be thinking about getting your first credit card. That’s important since building a credit history now could help later on with things like applying for a car loan, qualifying for a mortgage and even getting a job. 

Building your credit now as a student just might put you ahead of the game when you graduate. Read on to learn more about student credit cards and how they’re different from other credit cards.

As the name implies, it’s a credit card designed for college students who may have little or no credit history. But you can use it to make purchases in person and online, just like you can with a traditional credit card. 

If you use your student card responsibly by doing things like making on-time payments, that information may be reported to the three major credit bureaus—Equifax®, Experian™ and TransUnion®. Over time, with continued responsible use, that information can add up. Specifically, it can help show lenders that you may be ready to handle other types of loans.

To qualify for a student card, you first need to meet certain requirements. You’ll need to be at least 18 to apply—that’s according to the Credit CARD Act of 2009. And if you’re under 21, lenders may require you to have a co-signer or proof that you’re able to make regular payments.

Since college students are generally pretty busy and can’t all have full-time jobs, there are multiple ways to provide this proof. They include money from personal income, interest or dividends, public assistance, or somebody else’s income that’s regularly used to pay your expenses. Some lenders may also require you to be enrolled in college. 

When used responsibly, both student credit cards and traditional cards can be good choices for helping you build your credit. But student credit cards usually have some important features that are designed with students in mind. With a student card, you might find the following:

• Lower credit limit. You may have a lower credit limit compared with a traditional card. After you build a history using your credit responsibly, your credit card company may consider increasing your limit.
• Higher interest rate. Because you haven’t had a chance to demonstrate your creditworthiness yet, some lenders may see giving you a card as potentially risky. For that reason, the interest rate, or APR, on your card may be higher.
• Rewards—but on a smaller scale. Some student cards may come with rewards like cash back for certain types of purchases. (Great, right?) But traditional cards may offer even more. They could include bigger rewards, sign-up bonuses and other special perks.
• Benefits designed for students. With your student card, you may get special benefits, like credits for subscriptions to streaming services, when you pay your bill on time. 

Let’s say you get a student credit card from Capital One and develop good financial habits. You may eventually feel ready for more responsibility and spending power. If so, you may have options before and after graduation, including:

• Increasing your credit limit before graduation. While you’re still in school and using your student card responsibly, some lenders may automatically raise your credit limit. If yours doesn’t, you may be able to ask for an increase. Keep in mind though, if you request an increase, you may be required to provide your total annual income, employment status and monthly mortgage or rent payment. Lenders can take those into account along with other risk factors to determine whether to approve your request.
• Upgrading your credit card after graduation. As you go through life, you could start outpacing your available credit—if you start a family, for example. That may be one reason after graduation to consider an upgrade to a card that offers higher credit limits—and possibly even better rewards. You could apply for a new card, or you could see if you’re eligible to upgrade your student card.

Congratulations on making it to college. Here’s hoping there are big things ahead for you. 

As you think about what’s next, you may want to consider how using a student card responsibly could help you build your credit history. Getting one—and using it responsibly, of course—could help empower you to meet your financial and life goals.