[I get a referral for the links to the Citi Forward for College Students and the Discover Student card, but not for the Capital One Student card]
Million Mile Secrets reader Jacob writes in:
I’m sure you get this a lot. I’m a student with no credit history looking to start off. I’m wondering which card is best. The most important things to me are no annual fee, and no foreign transaction fee as I will be doing study abroad for the next 2 semesters. I also want a card that earns rewards, whether cash back or points.
I want your advice on which card to start with. I’m turning 20 next summer by which I hope to be getting big time travel rewards The Chase Sapphire (not preferred) seems to fit those qualifications but I don’t know if chase will approve me seeing as I have no credit history.
If you don’t have a credit history in the US, you’re almost certainly NOT going to get approved for many of the great miles and points credit cards such as the Citi American Airlines cards with a 50,000 mile sign-up bonus or the Chase Sapphire Preferred with a 40,000 point sign-up bonus.
Most of the lucrative miles and points credit cards are NOT targeted to folks applying for their first credit cards. So I wouldn’t recommend that Jacob sign-up for the Chase Sapphire without any credit history! The Chase Sapphire also charges 3% foreign transaction fees, so that wouldn’t help him abroad.
What’s a College Student to do?
Instead, I’d apply for a credit card specifically targeted to students with no credit history. Once I’m approved, I’d spend no more than 20% to 30% of the monthly limit and pay the balance back in FULL each month. You don’t want to max out your new credit card because your credit utilization ratio will increase and lower your credit score.
This shows banks that you can use credit responsibly and that you’re a good credit risk for them. Remember that banks are taking a bet that you will repay your debt every time they approve you for a credit card.
After about 5 to 7 months, I’d apply for a miles and points credit card or charge card. If you’re approved, great, and welcome to the addicting world of miles and points! Many college students report being able to get a miles and points card after having a credit history for 6 months, but as always, your miles may vary.
If not, continue to pay your student credit card on time and apply for a miles and points card again in a few months.
The effects of most college experiments can be forgotten after a good night’s sleep. But messing up your credit will haunt you for a long, long time.
You should NOT apply for a student credit card if you can’t pay off the bill in full each month. You’re never going to get ahead paying 25% or more in interest.
Only apply for a student credit card if you have the discipline to not exceed 20% to 25% of your credit limit and will pay the balance in FULL each month.
3 Things to Look for When Applying for Student Credit Cards
There are three things to look for when applying for a credit card for the first time to establish a credit history.
No Annual Fee: Because this is your first credit card, you should plan on keeping this card indefinitely to help build your credit score. You could either keep the same card for many years or ask the bank to convert it to a card with a higher credit limit while keeping the credit history associated with the card.
The length of your credit history accounts for 15% of your FICO score according to MyFico.com, so it makes sense to keep some credit cards open for a very long time.
And if you’re keeping the card open for a very long time, you’ll save money by not paying an annual fee. Fortunately, most student credit cards don’t charge an annual fee!
I still have my first college credit card from Capital One which had a $200 limit when I got it over a decade ago! I now have a $5,000 credit limit on that card and I don’t plan on cancelling it.
No Foreign Exchange fees: If you’re studying abroad for a semester or two, you don’t want to pay an extra 3% just for using your card outside the US.
However, most study abroad programs are in your junior or senior year. So you may already have a regular miles and point earning credit card by then, which doesn’t charge foreign exchange fees, if you build your credit history as soon as you enter college.
Earn Rewards or Cash Back: Don’t settle for any student credit card, just because you have no credit history!
Select a card which will ether give you lots of cash back for purchases or which you *may* be able to convert to miles and points later on. And a sign-up bonus doesn’t hurt either!
Which Student Card Should I Get?
Unfortunately, there isn’t one student credit card which satisfies all three criteria, but here are three credit cards specifically targeted to students.
The Citi Forward for Students is probably the most rewarding card for students.
- You get 5 times the points for every $1 spent on restaurants, books, movies and for music – almost as if the card was tailored to reward the activities of the average student!
- All purchases from Amazon.com (as of now) earn 5X points as well
- 100 extra Thank You points a month (1,200 a year) for paying your bill on time
- 1,000 bonus Thank You points for signing up for electronic statements.
Unfortunately, the card does have a 3% foreign transaction fee, so I wouldn’t use this card outside the US or for online purchases charged in a foreign currency.
You can only earn 75,000 Thank You points a year or $15,000 at 5X points.
How to Redeem: Citi Thank You Points can be redeemed for gift cards, cash back, statement credits or other products on the Thank You website.
To get ~1 cent per Thank You point, redeem your points for air travel through the Thank You portal or call Citi and ask them to mail you a check to pay off your student loans.
I wouldn’t cash out my Thank You points now, but would wait until I have the Citi Thank You Premier card. I’d then transfer points from the Citi Forward for College Students to the Citi Thank You Premier account and get a redemption value of 1.33 cents per Thank You point towards any air ticket.
- $20 Cash Back sign-up bonus after your 1st purchase within 3 months
- You earn 5% cash back for every $1 spent on different categories (movies, gas, restaurants, theme parks etc.) which change every quarter
- Earn 1% cash back once you exceed $3,000 in purchases (excluding 5% cash back categories & purchases at warehouse clubs and discount stores)
- Earn 0.25% cash back for purchases less than $3,000 a year
- No foreign transaction fee
You have to register for the 5% quarterly category bonus in ADVANCE and there is a cap on the limit of points you can earn.
Discover doesn’t issue any miles and points earning cards so it could make sense to have a Discover card as your first card because you can then focus on the miles and points cards with the other banks.
How to Redeem: You can redeem Discover Cash Back bonus can be redeemed for gift cards, cash back, statement credits or other products on the Discover website.
The Capital One card doesn’t have a sign-up bonus, but doesn’t charge any foreign exchange fees.
- You earn 1% cash back on all purchases
- An extra 0.25% cash back for paying your bill on time
- No foreign transaction fees
Capital One likes to keep their cards simple, and you earn 1% on all purchases without having to activate any categories.
Bottom Line: You won’t be able to get miles and points cards with a large sign-up bonus unless you have a credit history. But banks realize that college students don’t have any credit history and have specific cards to help them establish a credit history.
You can establish a credit history by applying for a college credit card and charging 20% to 30% of your credit line and pay your balance in FULL each month.
After about 5 to 7 months, you should be able to get approved for the regular miles and points credit cards.
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