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Published on April 21, 2011 | Updated on August 7, 2015
Getting your first credit card used to be easy, back in the days of easy lending. Come orientation, students would be handed an application that was all but signed for them, rewarded with pizza or Frisbees, and given a credit card with almost no questions asked. Then came financial reform. Like post-graduation jobs, credit cards suddenly became less available to students, leaving many asking, “Where will I get my first credit card now?”
If you want a working man’s credit limit, you need to be a working man
According to the Bureau of Labor Statistics, seven in ten college students aren’t employed, so they have no income to list. For an income-less college student to receive a decent credit limit or anything close to a reasonable interest rate, he’ll need his parents to co-sign the loan. That way, the parents’ income and credit history dictate the card’s terms, and issuers can rest assured that the person on the hook for the debt is actually able to repay it. Having a co-signer has distinct advantages. If you think you can handle it, you’re more likely to get
a higher credit limit. You can also qualify for student credit cards that give rewards or have low interest rates.
Almost no student cards have annual fees, while almost all secured credit cards do. The reassurance of a co-signer makes you a more attractive customer, so you’ll get a better product. Still, the co-signer requirement comes with its own difficulties, especially in unusual cases. A student whose parents are abroad or otherwise unavailable to sign a loan would be unable to get a credit card. The tragic case of an irresponsible parent running up debt on a child’s card is rare but not unheard of. Conversely, if a student misses payments or runs up a lot of debt, she’ll bring down her parent’s credit score along with her own. Or, for whatever reason, a college student could simply not want her parents to see her credit card statement.
For the co-signer-less, consider a secured credit card or look at credit unions
There are options for students who can’t or don’t want to take the co-signer route. For those without a steady stream of income or solid credit history, credit unions offer better terms than a traditional bank. Credit unions are generally far more sympathetic to students with a limited credit history than their for-profit counterparts. They’re more likely to overlook a thin file and take the risk in offering a young adult his first credit card. Some universities even have affiliated credit unions.
A secured credit card is likely to be the most accessible as it is exempt from the CARD Act’s income requirements. Backed by collateral deposited when the account opens, a secured credit card helps to establish a good credit history for those who don’t qualify for a regular credit card. We at NerdWallet don’t often recommend a secured credit card, as it comes with annual or monthly fees, but a reasonably priced secured card can develop a solid payment history. Here, too, credit unions can step in. They usually don’t levy annual fees or hit you with unexpected penalties. A number of credit unions even offer secured cards with rewards.
What are the best first credit cards?
Among our most popular first credit cards are: