Advertiser Disclosure

Best of, Credit Cards

Best Credit Cards for Fair Credit

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Having fair credit doesn’t mean you’re ineligible for great credit cards. We’ve rounded up the top credit cards with the best offers in a range of different categories that you’re still likely to be approved for, even with fair credit. These credit cards can help you build credit as long as you use them wisely. In this guide, we’ll show you the best credit cards for fair credit scores as well as how to use them to boost your credit score even higher.

Here are some of the products we will be discussing today:

Check If You’re Pre-qualified

Before applying for any credit card it’s helpful to check if you’re pre-qualified from a variety of institutions. The soft credit check the institutions perform does not harm your credit score and allows you to compare credit options. Sites such as CreditCards.com provide good tools that can match you to offers from multiple credit card companies without impacting your credit score. You can read our complete guide to getting pre-qualified for a credit card here.

Build Credit with Secured Cards

A great approach to rebuilding credit is to get a secured credit card. In order to get the card, you will have to deposit money that will be your line of credit. To effectively rebuild your credit, you must use the card, and we recommend not charging more than 20% of your credit line. For example, if you have a $500 credit line, you should not charge more than $100. Then, pay off your balance in full every single month. You can even build credit with $10 a month on a secured card and see your credit score rise.

After you’ve consistently managed your secured card well over a period of time, you may be able to increase your credit line beyond your initial deposit or migrate to an unsecured credit card.

We’ve reviewed the best secured cards in the market and found our top pick — the Discover it® Secured Card. This card has no annual fee, a reasonable security deposit and offers an easy transition to an unsecured card. In addition, Discover offers a rewards program and free access to your FICO score. These reasons are why we recommend the Discover it® Secured Card for people with fair credit.

Build Credit with Secured Cards

Discover it® Secured Card - No Annual Fee

APPLY NOW Secured

on Discover’s secure website

Read Full Review

Discover it® Secured Card - No Annual Fee

Annual fee
$0 For First Year
$0 Ongoing
Minimum Deposit
$200
APR
23.99% APR

Variable

Credit required
zero-credit
No credit, 670 or less

Best for Cash Back

If you have fair credit and want a cash back card the QuicksilverOne® Rewards credit card from Capital One® is a good option. As a consumer with fair credit you may not qualify for all cash back cards, but you may qualify for the QuicksilverOne® Rewards card since it is made for those with fair credit. With this card you will earn unlimited cash back, with no changing categories, and the rewards never expire.

However, this card comes with a high APR and annual fee. To earn enough cash back rewards to pay for the card itself each year you’ll need to spend $2,600 annually ($217 per month). To net a cash back of $50 you need to spend $5,933 in a year ($494 per month). This card may be an option for you if you want to earn more than 1% cash back.

Best for Cash Back

QuicksilverOne® Rewards from Capital One

APPLY NOW Secured

on Capital One’s secure website

QuicksilverOne® Rewards from Capital One

Annual fee
$39 For First Year
$39 Ongoing
Cashback Rate
up to 1.5%
APR
24.99%

Variable

Credit required
fair-credit

Average

Best Low Ongoing APR

No one wants to carry a balance on their credit cards, but if you must, it’s best to get a card with a low ongoing APR. Many lenders charge high APRs around 25%, but you can potentially qualify for an APR as low as 9.15%. This card will charge you less money on your debt than the typical credit card, which can save you big dollars in the long run.

Best Low Ongoing APR

MasterCard Platinum from Aspire FCU

APPLY NOW Secured

on Aspire Credit Union’s secure website

Read Full Review

MasterCard Platinum from Aspire FCU

Intro Rate
0%

promotional rate

Intro Fee
2%
APR
8.90%-18.00%

Variable

Duration
6 months
Credit required
fair-credit

Average

Best for Small Business Owners

Running a business is hard. Small business credit cards can make it a bit easier for you by giving you rewards for everyday purchases. Nevertheless, be aware: Business credit cards forego certain protections that personal credit cards have under the Credit CARD Act. For example, card issuers can change the payment due date or interest rate without giving you prior notice.

Still, small business cards can be a great option for you to build your credit and save money, even if you don’t have a traditional brick-and-mortar business. You can apply for these cards with just a DBA or even your own name, if you’re a freelancer.

Best for Small Business Owners

Spark Classic for Business from Capital One

APPLY NOW Secured

on Capital One’s secure website

Read Full Review

Spark Classic for Business from Capital One

Annual fee
$0 For First Year
$0 Ongoing
Cashback Rate
1% on all spend
APR
23.99%
Credit required
fair-credit

Average

Best for Students

You may have a fair credit score because you are a student. Student cards provide a great way for you to build your credit score and establish good credit history. The Discover it® for Students card is made with students in mind and offers ways to help you build credit and also earn rewards.

Best for Students

Discover it® for Students

APPLY NOW Secured

on Discover’s secure website

Read Full Review

Discover it® for Students

Annual fee
$0 For First Year
$0 Ongoing
Cashback Rate
up to 5%
APR
13.99%-22.99%

Variable

Credit required
zero-credit
New to Credit

FAQ

There’s a lot of math that goes into computing your credit scores, but at the end of the day, a fair credit score is defined as being between 649 and 699. Here’s how a fair credit score sits in relation to other credit scoring classes:

  • Excellent: Above 760
  • Good: 700-759
  • Fair/Average: 649-699
  • Poor: 600-648
  • Very Poor: Under 599

You can check your credit score for free on sites like Credit Karma, Chase Credit Journey, or AnnualCreditReport.com.

Having a good or excellent credit score unlocks a lot of advantages, such as lower interest rates and better approval odds for high-value credit cards and other financial products. These advantages will result in more dollars in your wallet at the end of the day. For example, having a high credit score can save you tens or even hundreds of thousands of dollars in interest payments over your lifetime, especially for big-ticket loans like a home mortgage.

But if you have a fair credit score, don’t fret! There is a reason that your score is less than optimal, and thus there are real, concrete steps you can take to boost your credit score into the good and excellent range.

If you play your cards right, you can even join the exclusive 800+ credit score club (unfortunately, it’s not an official club, and you don’t get a shower of balloons and confetti once you reach it — but you will get access to some of the most exclusive financial products).

There can be many reasons why your credit score is below 700. Here are some of the most common ones:

  • You have late payments on your credit report. Having even just one late payment on your credit report can seriously harm it because payment history makes up 35% of your credit score. Unfortunately, unless it’s an error, you’ll just need to wait for it to drop off of your credit report in seven years. To prevent this from happening, make sure all of your debt payments are set up on autopay. That way, you won’t have to worry about it.
  • You have a lot of credit card debt. Credit utilization ratio is one of the biggest factors in calculating your credit score — it affects 30% of the final score. It’s simply how much you owe relative to how much you are allowed to spend. For example, let’s say you have two credit cards with a $5,000 limit each, and you owe $2,000. Your credit utilization ratio is 20% because you owe $2,000 out of a possible $10,000. Luckily, this is one of the easiest factors to correct that will boost your credit score big time in the short run: Pay off your balance, and your score will bump up immediately.
  • You don’t have a long credit history. Although credit history doesn’t factor into the calculation of your credit score as much as the credit utilization ratio and payment history, it still makes up a sizable chunk at 15%. There’s not much you can do about this one: Simply wait for your accounts to age.
  • You have a lot of credit inquiries. Banks don’t like to see you applying for credit like an out-of-control spender in Las Vegas. Each time you apply for credit or a loan, it’s recorded on your credit report as a credit inquiry, and it stays there for two years. To minimize the number of credit inquiries you have, always shop around and make sure creditors use a soft pull credit check unless you’re absolutely ready to apply for the line of credit. This factor makes up just 10% of your credit score, but it’s an easy one you can affect as long as you’re careful about applying for credit.
  • You don’t have a wide variety of account types. You may be an ace at handling your student loans, but creditors also want to know you can handle other types of credit like mortgages and credit card debt, too. The more types of credit accounts you have on file, the better. However, we don’t recommend taking out a loan just for the sake of boosting your credit score — that costs money, and you’ll only receive a modest benefit from it because credit mix only makes up 10% of your credit score.

As you can see, you do have a lot of options when it comes to fine-tuning your credit score into the good or excellent category. We recommend the helpful credit score simulator at Chase Credit Journey to check your current score and see how these adjustments can potentially change your credit level. It’s available whether you’re a Chase customer or not. Give it a try!

Applying for a credit card is easy. You’ll need some basic information like name, address, and Social Security number. You’ll also need employment and income information. Simply enter it into the online form on the credit card company’s website, visit a branch of the bank (if they have one), or call the credit card company directly. You’ll usually receive instant notification if you’ve been approved or not.

There are many ways for you to increase your credit score. Ultimately practicing responsible credit behavior is the best way to see your score rise. Here are a few ways you can increase your credit score:

  • Have someone add you as an authorized user: If you have a willing (and very trusting) friend or family member with better credit, you can ask them to add you as an authorized user onto one or more of their credit cards. Their credit will not be harmed by this (as long as you don’t rack up charges or missed payments), and the credit card will show up on your credit report just as if you had applied for it — boosting your credit utilization ratio, number of accounts, and account age if you keep it for a long time.
  • Increase your credit history length: Unfortunately, you can’t go back in time, but you can still affect your credit history length. Your credit score is partially based off of average credit history length, and the more old accounts you have, the better. If you already have credit cards open, consider keeping them open so your average credit history won’t decrease and ding your credit. Each new credit card you get will drop your average account age, and it’ll take longer to boost this portion of your score.
  • Maintain a low credit utilization: Credit utilization (the percentage of available credit you’re using) is one of the biggest factors in calculating your credit score. The lower, the better. To decrease your utilization ratio, simply pay off your credit card. You can also request a credit limit increase from your credit card issuer to lower your credit utilization ratio — just make sure not to rack up a balance again with that extra credit or you’ll be back to square one.

Missing a payment can single-handedly cause your credit score to drop by 100 points or more. To avoid this, simply set up your credit card on autopay for the minimum amount due — that way you’ll never have to worry about missing a payment.

You can always apply for a personal loan if you need some cash right now for something. You can use this tool to shop around for the best interest rates without hurting your credit score. It’s smart to avoid hard inquiries until you’re ready to actually apply for a personal loan so that your credit isn’t dinged with multiple inquiries.

Each credit card is different, so you’ll need to check the fine print. Usually, though, you’ll need to both charge a purchase and pay off your bill before you’re eligible for those cash back rewards. Then, they’ll tally up this amount and periodically either send you a check, or offer a statement credit.

If you’re running a small business, it’s often easy to mix your personal and business accounts, especially if you’re self-employed. This creates an accounting nightmare to sort through, so it’s recommended (but not required) that you have a separate business banking account and credit card, if you need one.

Lindsay VanSomeren
Lindsay VanSomeren |

Lindsay VanSomeren is a writer at MagnifyMoney. You can email Lindsay here

TAGS:

Advertiser Disclosure

Best of, College Students and Recent Grads, Credit Cards

Best Student Credit Cards August 2017

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Getting a credit card while you’re in college might seem dangerous or confusing. But if you are able to use a student credit card responsibly, you do not need to be afraid, and you can set yourself up for financial success after you leave school.

Fortunately, learning how to choose and use the right student credit card is relatively simple. Make sure you avoid annual fees and go with a bank or credit union you can trust. When you get the card, make sure you use it responsibly and pay the balance in full and on time every month. If you do these things consistently over time, you can leave school with an excellent credit score. And if you want to rent an apartment or buy a car, having a good credit score is very important.

Our Top Pick

Discover it® for Students

APPLY NOW Secured

on Discover’s secure website

Read Full Review

Discover it® for Students

Annual fee
$0 For First Year
$0 Ongoing
Cashback Rate
up to 5%
APR
13.99%-22.99%

Variable

Credit required
zero-credit
New to Credit

Best for Commuter Students

Discover it® chrome for Students

APPLY NOW Secured

on Discover’s secure website

Read Full Review

Discover it® chrome for Students

Annual fee
$0 For First Year
$0 Ongoing
Cashback Rate
up to 2%
APR
13.99%-22.99%

Variable

Credit required
fair-credit
Fair Credit, New to Credit

Best Flat-Rate Card

Journey Student Credit Card from Capital One

APPLY NOW Secured

on Capital One’s secure website

Read Full Review

Journey Student Credit Card from Capital One

Annual fee
$0 For First Year
$0 Ongoing
Cashback Rate
up to 1.25%
APR
24.99%

Variable

Credit required
fair-credit

Average Credit

Best Intro Bonus

Wells Fargo Cash Back College℠ Card

Annual fee
$0 For First Year
$0 Ongoing
Cashback Rate
up to 3%
APR
11.90%-21.90%

Variable

Credit required
fair-credit
Fair Credit

Best Credit Union Card

Altra Federal Credit Union Student Visa

APPLY NOW Secured

on Altra’s secure website

Read Full Review

Altra Federal Credit Union Student Visa

Annual fee
$0 For First Year
$0 Ongoing
APR
14.90%

Fixed

Credit required
zero-credit
New to Credit

Also Consider Also Consider

Golden 1 Credit Union Platinum Rewards for Students:

This credit card offers a snazzy rewards program: rather than accumulate points, you’ll get a cash rebate instead. All you have to do is make a purchase. At the end of the month, you’ll get a rebate of 3% of gas, grocery, and restaurant purchases, and 1% of all other purchases deposited back into your Golden 1 savings account at the end of the month. You can join Golden 1 by joining the Financial Fitness Association for $8 per year and keeping at least $5 in a savings account.

What should I look for in a student credit card?

The most important thing to consider when looking for a student credit card is that it charges no annual fee. You should never have to pay to build your credit score. Fortunately, most student cards don’t charge you an annual fee, but it’s still something to watch out for.

The second most important thing you should keep an eye out for are tools that help you learn about credit or even promote good credit-building habits. For example, some student credit cards will give you a free monthly FICO score update. You can use this freebie to see in real time how your credit score changes as you build credit history by keeping the card open, or paying down your credit card balance, for example.

The last thing you should be considering when picking out a student credit card is the rewards program. I know, I know, it seems counterintuitive. But stick with me — I’ll show you why in the next question.

Why shouldn’t I be concerned about maximizing my rewards while in college?

Rewards cards are nice to have. But if you’re a college student, here’s the truth: you probably won’t spend enough to earn meaningful rewards.

Why? With a good rewards program, you can earn points or cash back. A small percentage of your monthly spending can add up quickly. However, given the tight budget that most college students live on, it will probably take a while to earn meaningful rewards. For example, if you earn 1.25% cash back and spend $300 a month on your card, you would earn $45 of cash back during the year.

College students are very good at making good use of $45. And our favorite card offers a great cash back rewards program. Just don’t expect to earn a lot of cash back, given the tight budget of a college student.

Why should I get a credit card as a college student?

There are a lot of great reasons why you should get a credit card, as long as you can commit to using it responsibly.

The single biggest reason why you should get a credit card as a college student is because you can start establishing a credit history now. When you graduate from college, you will need a good credit score to get an apartment. And your future employer will likely check your credit report. Building a good credit history while still in college will help prepare you for life after graduation.

Getting a credit card while in college can also train you to develop good credit habits now. But you need to be honest with yourself. If you find that you can’t avoid the temptation of maxing out your credit card, you might want to switch to a debit card or cash.

Finally, getting a credit card now can be the motivation you need to start learning about credit. These skills aren’t hard to learn, and they could save you thousands or even hundreds of thousands of dollars later in life (when you want a mortgage, for example).

What is the CARD Act and why should I care about it?

Many years ago, credit card companies would market on college campuses. You could get a free beer mug or t-shirt in exchange for a credit card application. And you would be able to qualify for a credit card without having any income. The Credit Card Accountability Responsibility and Disclosure (CARD) Act was signed into law in May 2009 to change a number of practices.

How did the CARD Act change student credit cards?

The CARD Act made a lot of changes in how credit card issuers do business with students. One of the biggest changes was requiring students to be able to demonstrate an ability to pay. If you are under 21 and do not have sufficient income (a campus job, for example), you would need to get a co-signer.

In addition, colleges must now limit the amount of credit card marketing on campus. The days of free t-shirts and pizzas in exchange for credit card applications are gone. But that doesn’t mean it is impossible for a college student to get a credit card. Some highly reputable banks and credit unions still offer student cards. And building a good credit score while still in college is still highly recommended.

How can I protect myself from racking up debt?

When used properly, credit cards are a very convenient method of repayment. However, when not used properly, you can end up deep in credit card debt. It is important to establish a healthy relationship to credit now, with your first credit card.

You should try to ensure that you pay off your credit card bill in full and on time every month. Ideally, you should set up an automatic monthly payment. And to keep yourself on track, take advantage of alerts offered by most credit card companies. You can even get daily text messages reminding you of your balance.

How can I automate my credit card usage?

If all of this sounds confusing, don’t worry. There’s actually a way you can automate your payments so you never even have to bother with the hassle of using a credit card. All it takes is a few minutes of upfront work.

First, you’ll need at least one recurring monthly bill of the same amount, such as Netflix or Spotify. Log in to your account and set up an automatic payment each month using your credit card. Make a note of how much your monthly bill costs.

Next, log in to your bank account. Set up a second automatic payment to go to your credit card each month for the same amount as the bill. If your bank doesn’t offer the option to set up automatic payments, you may also be able to set up your credit card to automatically withdraw the amount of the bill from your bank.

Because you know this bill will be for the same amount each month (barring any price increases), you can literally just leave this running in the background each month on autopilot. You don’t even have to carry your credit card in your wallet if you don’t want to. Then, when you graduate, you’ll automatically have an improved credit score!

What happens to my student credit card when I graduate?

Congratulations! You’ve made it to the finish line. But what about your student credit card? You will have a few options once you graduate.

First, you can simply keep it. You will want to keep the credit card open, because it helps you build a long credit history. However, you might want to call your credit card company and ask if you can migrate to a standard (non-student) credit card.

But if you have been using your credit card properly, you will have an excellent credit score when you graduate – and you will be able to get any credit card that you want.

Here is a summary of our favorite cards:

Credit cards
Best for
Lindsay VanSomeren
Lindsay VanSomeren |

Lindsay VanSomeren is a writer at MagnifyMoney. You can email Lindsay here

TAGS:

Advertiser Disclosure

College Students and Recent Grads, Reviews

Review: Citi ThankYou Preferred Card for College Students

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Citi ThankYou Preferred Card for College Students is a decent credit card that can help you build your credit history and earn rewards without having to pay an annual fee. It has a nice bonus offer (2,500 points after spending $500 in the first three months) and has a decent ongoing rewards proposition (2 points on restaurant and entertainment purchases, with 1 point on everything else). Unfortunately, ThankYou points don’t have great redemption value, and Citi charges a 3% foreign transaction fee when you use the card overseas. And with a high APR range of 15.49%-25.49%, you would want to avoid borrowing on this card. The Citi ThankYou Preferred Card for College Students is featured as one of our recommendations for best student credit cards of 2017.

Citi ThankYou® Preferred Card for College Students

APPLY NOW Secured

on Citibank’s secure website

Citi ThankYou® Preferred Card for College Students

Annual fee
$0 For First Year
$0 Ongoing
Cashback Rate
2 points per dollar
APR
15.49%-25.49%

Variable

Credit required
good-credit
Good Credit

How the Card Works

This credit card charges no annual fee and reports to all three credit reporting agencies. If you handle the card responsibly, you should be able to build your credit history while in school and have a good credit score by the time you graduate. We recommend using the credit card every month, but never spending more than 10%-20% of the credit limit. Make sure you pay your statement balance in full and on time every month — and you will see your score improve over time.

The card comes with an intro offer. You will be charged 0% interest on purchases for the first seven months, and there is no retroactive interest penalty (this is not deferred interest). If you were already planning on making a big purchase, the 0% interest rate can help you minimize or reduce the cost of borrowing. However, you should be careful. Sometimes a 0% purchase rate can encourage people to spend more than they should — and you don’t want this to be a temptation to go into debt. After the intro offer, the interest rate increases dramatically, to a high double-digit rate. Student cards are great ways to build your credit, but they are terrible ways to borrow money.

With this card, you have the chance to earn ThankYou points from Citibank. With ThankYou, you can turn your points into gift cards or cash, or even use the points to book travel. ThankYou points are not particularly valuable. Here are a few examples of how ThankYou points can be redeemed:

  • For cash back: 100 points = $0.50, minimum redemption is 10,000 ($50) or 20,000 ($100).
  • For a statement credit: 100 points = $0.50, minimum redemption is 2,000 points ($10).
  • For gift cards: you can get up to 100 points = $1 (although it can vary by gift card), minimum redemption is 2,500 points ($25).
  • You can transfer your points to airline and hotel partners. However, as a college student, you might not have a lot of frequent flier miles, making this option a waste.

You can earn 2,500 ThankYou points if you spend $500 within the first three months of opening the card. In addition, you will earn 2 points on purchases for dining at restaurants and 1 ThankYou point on all other purchases. If you use those points for cash, you are only getting 0.5% on your everyday purchases — a pretty lousy deal. You can do much better elsewhere.

How to Qualify for the Card

Citi is targeting students with this card, which means they do not expect you to have excellent (or any) credit. However, they do expect that you will have a job and income. You need to be able to prove that you can afford to make your monthly payment on time, and a parental allowance is not sufficient.

Citi will likely approve people with a thin or no credit history. However, if you already have negative items on your credit report — like missed payments or unpaid medical or mobile phone bills — it could be harder to get approved. If that is the case, you might need to start your credit-building journey with a secured credit card.

What We Like About the Card

No annual fee.

Students should not have to pay a fee to build their credit score. Fortunately, with Citi there is no annual fee. And so long as you pay your statement balance in full and on time every month, you will never pay any interest either.

A nice ThankYou bonus offer.

You can earn 2,500 bonus points when you spend $500 within the first three months of opening the card. If you turn that into cash, it would be worth $12.50. With some gift cards, you could get up to $25 of value. That is not terribly exciting — but it is still free money.

What We Don’t Like About the Card

The ongoing rewards proposition is weak.

For most college students, cash is king — and earning cash back is a nice benefit of a credit card. Cards from competitors can earn from 1.25% up to 5% cash back (in some categories). If you use your ThankYou points for cash, you will only get 50 cents for every 100 points earned. Plus, cash back can only be redeemed in increments of $50.

There is a foreign exchange fee.

If you plan on studying abroad, a credit card is very useful. Unfortunately Citi will charge you 3% every time you use your card abroad — making this the wrong card for international travel.

The interest rate is high.

After the intro period is over, you will be stuck with a high, double-digit rate. Unfortunately that is the case with most student credit cards — so you would be very wise to avoid credit card debt completely.

Alternatives to the Card

We like that the Citi card has no annual fee. However, if you want rewards or a card for overseas travel, there are much better options out there. Here are two of our favorites.

If You Want to Earn More Rewards

If you want to earn more cash back, Discover is the best option. The Discover it card for students does not charge an annual fee and also provides free access to your FICO score. But it does something we really like: It offers a $20 cash back bonus every year (for up to five years) for good grades. If you get a 3.0 GPA or higher, you will get a $20 bonus. That is on top of a cash back rewards program where you can earn 5% cash back in rotating categories each quarter like Amazon.com, restaurants, ground transportation and more, up to the quarterly maximum each time you activate. Plus, unlimited 1% cash back on all other purchases. And you can get a dollar-for-dollar match of all the cash back you’ve earned at the end of your first year, automatically.

If You Want to Travel Abroad

If you want to travel abroad, you should find a Visa or MasterCard option that does not charge a foreign transaction fee or annual fee. Capital One does just that with its Journey Student credit card. In addition to no annual fee and no foreign transaction fees, you can earn up to 1.25% cash back. You earn 1% when you spend, and another 0.25% if you make your payment on time.

Bottom Line: Who Benefits Most from the Card

If all you care about is building credit, and all of your spending is in the U.S., this is a good card. With no annual fee, Citi reports to all three credit bureaus — which should help you build your score quickly. However, if you want to earn rewards or travel overseas, you can find better deals elsewhere.

Student Credit Cards: FAQs

A student card is a credit card specially designed by a lender to get college students started with credit. The major difference between a student credit card and a regular credit card is that the student card will likely have a higher interest rate. Regular cards tend to average about 15% annual interest. In a recent MagnifyMoney study, we found the average student credit card carries an interest rate of 21.4%.

Your goal with your student credit card is to build your credit so that by the time you graduate, you have a healthy credit score in the high 600s to mid 700s. That way, when you graduate, you’ll be in a great position to make larger purchases like a new car or your first home. At that point you may actually want to earn rewards, and you’ll qualify for the best cards because you have a great score.

You should really only get a credit card if you want to build your credit score, not because you need extra money to make ends meet. If you can’t afford your monthly expenses as it is, a credit card might only make things worse.

The easiest strategy is this: Set up one recurring bill (like your Netflix or Spotify account) on your card. And pay it off in full each month. Follow that advice while you’re in school and you will absolutely graduate with a great credit score.

You can still build up your credit without having to open a card on your own. Ask you parents if you can become an authorized user on their account. All of their good credit behavior will be reported on your credit report as well. Also, consider opening a secured credit card. It’s a tool that’s meant precisely to help build credit but doesn’t have the same risks as a regular credit card. Read more about secured cards here.

Lindsay VanSomeren
Lindsay VanSomeren |

Lindsay VanSomeren is a writer at MagnifyMoney. You can email Lindsay here

TAGS:

Advertiser Disclosure

College Students and Recent Grads, Reviews

Discover it for Students Review: Earn Cash Back and Build Credit

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

If you are a student, a credit card can be a great way to build your credit score. It can also be a useful tool when shopping online or renting a car. But credit cards also come with a temptation — to spend too much. We recommend getting a student credit card as long as: (a) there is no annual fee, and (b) you have the self-discipline to pay your statement balance in full every month and use the card wisely.

Discover it is one of our favorite credit cards for students — largely because it charges no annual fee, offers generous cash back and rewards the right behavior. There are some other nice perks — like a free FICO score. The Discover it for Students card is featured as one of our recommendations for best student credit cards of 2017.

Discover it® for Students

APPLY NOW Secured

on Discover’s secure website

Discover it® for Students

Annual fee
$0 For First Year
$0 Ongoing
Cashback Rate
up to 5%
APR
13.99%-22.99%

Variable

Credit required
zero-credit
New to Credit

What We Like About the Discover it for Students Card

You can easily build your credit history and score.

This credit card reports to all three credit bureaus, which will help you establish credit and improve your score with wise use over time. Our tip: never use more than 10%-20% of the available credit, so you keep your utilization low. Pay your bill on time every month (ideally, automate the payment). By the time you graduate, you should have an excellent score.

No annual fee.

We believe that you should be able to build your credit score without paying an annual fee. Fortunately, Discover does not charge an annual fee on its student cards. Discover does not charge an annual fee on any of its cards.

You will be able to see your FICO score for free.

It is getting much easier to get your credit score for free — you do not need to take out a credit card to have access. However, we do like that you will be able to see your FICO score on your statement and online. This will help you keep tabs on your credit as you learn about it and (hopefully) see it increase over time. Having a good credit score when you graduate can be very helpful – especially if you want an auto loan, mortgage or apartment.

Monitor Your Social Security Number for free.

Discover will monitor your Social Security Number and alert you if they find your Social Security Number on any of thousands of risky websites. Activate for free. This is a great feature that will help alert you of possible fraud and add an extra layer of protection to your account.

Interesting feature: rewards for good grades.

This credit card also has a sweet bonus: you can get $20 cash back each school year your GPA is 3.0 or higher for up to the next 5 years. This is a nice feature to reward what really matters in college — getting good grades and graduating.

And, yes — there is cash back.

Discover invented the concept of cash back in the 1980s, and they are regularly generous with the rewards that they offer. On this card, you can earn 5% cash back in rotating categories each quarter like Amazon.com, restaurants, ground transportation and more, up to the quarterly maximum each time you activate. Plus, unlimited 1% cash back on all other purchases.

There is another bonus.

At the end of your first year as a cardholder, you will get a dollar-for-dollar match of all the cash back you’ve earned – automatically. That will be a really nice one year anniversary gift.

Watch Out for These Pitfalls

Interest rates are not low.

This is not unique to Discover — but most student cards charge higher interest rates because students are higher risk. Your goal with a student card is to build your credit history — not to go deeper into debt. So long as you pay your statement balance in full and on time every month, you should not have to worry about the interest rate.

Limited acceptance overseas — especially in Europe.

If you plan on studying abroad or backpacking across Europe, you might find it difficult to use your Discover card. In Asia, you get better coverage with JCB (Japan) and China UnionPay. However, in Europe you will be relying upon the Diners Club International network, which is limited.

Who the Card is Best For

If you are a responsible student looking to build your credit while earning rewards along this way, this card could be appropriate for you. With no annual fee and up to 5% cash back, this is a great first card.

Alternatives

While the Discover it for Students card is a great choice, there may be better options depending on your situation.

Spend a lot at Gas Stations and Restaurants?

If you’re a commuter student, the Discover it Chrome for Students card may make more sense. This card offers many of the same perks as the Discover it for Students card, like the Good Grades Rewards program, no annual fee, and a cash back match at the end of your first year. But the Discover it Chrome offers a higher 2% cash back rewards rate on gas and restaurant purchases, up to $1,000 in combined purchases per quarter. After that, you’ll earn 1% cash back — and you don’t need to activate these rewards categories like with the Discover it for Students card.

If You Want to Travel Abroad

If you plan on traveling abroad, consider the Capital One Journey Student Credit Card. Because the card is a Visa, it will have more acceptance overseas. And Capital One does not charge foreign transaction fees – making this a great travel companion. In addition, you can earn 1% cash back on all purchases, plus an extra 0.25% cash back when you pay your bill on time.

Student Credit Cards: FAQs

A student card is a credit card specially designed by a lender to get college students started with credit. It helps them build a relationship with customers early on and helps you build your credit score.

The major difference between a student credit card and a regular credit card is that the student card will likely have a higher interest rate. That’s because the bank has no way to prove you are a reliable borrower yet since you have little to no credit history. Regular cards tend to average about 15% annual interest. In a recent MagnifyMoney study, we found the average student credit card carries an interest rate of 21.4%.

Your goal with your student credit card is to build your credit so that by the time you graduate, you have a healthy credit score in the high 600s to mid 700s. That way, when you graduate, you’ll be in a great position to make larger purchases like a new car or your first home. At that point you may actually want to earn rewards, and you’ll qualify for the best cards because you have a great score.

You should really only get a credit card if you want to build your credit score, not because you need extra money to make ends meet. If you can’t afford your monthly expenses as it is, a credit card might only make things worse.

Let’s say you charged $300 to your student card for books at the start of the semester. If you made a minimum monthly payment of $9, it would take four years and four months to pay off a card with a 21.4% annual percentage rate (APR). At that point you would have paid a total of $460, assuming your books were your first and only charge on the card.

The easiest strategy is this: set up one recurring bill (like your Netflix or Spotify account) on your card. And pay it off in full each month. Follow that advice while you’re in school and you will absolutely graduate with a great credit score.

You can still build up your credit without having to open a card on your own. Ask your parents if you can become an authorized user on their account. All of their good credit behavior will be reported on your credit report as well. Also, consider opening a secured credit card. It’s a tool that’s meant precisely to help build credit but doesn’t have the same risks as a regular credit card. Read more about secured cards here.

Lindsay VanSomeren
Lindsay VanSomeren |

Lindsay VanSomeren is a writer at MagnifyMoney. You can email Lindsay here

TAGS:

Advertiser Disclosure

College Students and Recent Grads, Reviews

Discover it Chrome for Students Review: Build Credit and Earn Cash Back

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Discover has created one of our favorite credit cards for students, the Discover it® Chrome for Students. You can build your credit without worrying about an annual fee. You can get a $20 cash back bonus every year if your GPA is above 3.0. And you can earn some serious cash back. Discover pays 2% on spending at gas stations and restaurants, up to $1,000 in combined purchases each quarter. Plus you can earn 1% cash back on all other purchases. There is also a generous bonus for new customers: At the end of your first year, all of the cash back that you earned will be matched. The Discover it® Chrome for Students card is featured as one of our recommendations for best student credit cards of 2017.

Discover it® chrome for Students

APPLY NOW Secured

on Discover’s secure website

Discover it® chrome for Students

Annual fee
$0 For First Year
$0 Ongoing
Cashback Rate
up to 2%
APR
13.99%-22.99%

Variable

Credit required
fair-credit
Fair Credit, New to Credit

How the Card Works

Discover is famous for cash back. In the 1980s, when all credit cards charged an annual fee and offered no rewards, Discover changed everything by offering a credit card with no annual fee that actually paid its customers cash back. Discover has continued to innovate and has one of the better cards on the market for college students.

Discover it chrome charges no annual fee and reports to all three credit bureaus. As a college student, building your credit history is the primary reason to get a credit card. And you should never have to pay an annual fee to build your credit score. To get the best results, try to keep your balance low and make your payment in full and on time every month.

Discover has one of the most flexible cash back programs on the market. With most credit cards, you have to earn a minimum amount of cash back before you can redeem. Fortunately, that is not the case with Discover. Even if you only have $1 of cash back, you can redeem it. And with this card, there are multiple ways to earn.

If you spend a lot of money at gas stations and restaurants, this card is a great choice. You can earn 2% cash back at gas stations and restaurants on up to $1,000 in combined purchases each quarter. In addition, you get 1% cash back on all other purchases.

Our favorite feature is that Discover offers a bonus: cash back for good grades. For the next five years, every year your GPA is 3.0 or higher, you can get $20 cash back.

On top of all of this, Discover will match whatever cash back you earn during the first year. To do this, Discover will add up all the cash back you’ve earned on your student card and match every bit of it at the end of the first year.

All of this put together can make the card very lucrative. Imagine you spend $300 a month — with $200 of it at gas stations and restaurants. During the first year:

  • $200 a month of spending in gas stations and restaurants would earn $48 cash back during the first year.
  • $100 a month of spending in all other categories would earn $12 cash back.
  • Altogether, you will have earned $60 cash back. Discover would then match that cash back at the end of your first year, meaning you could earn another $60.
  • And, if you have a 3.0 or higher GPA, you could get the “Good Grade Reward” on top.

There are a few other nice perks that come with the card. You will get a 0% intro APR for the first six months on purchases. You will have access to your FICO score for free, so that you can watch your score evolve. And Discover has invested heavily in some nice features, including the ability to freeze your account with the push of the button if you don’t want it used (for example, while traveling) as well as free Social Security Number monitoring — where Discover will alert you if they find your Social Security Number on any of thousands of risky websites.

How to Qualify for the Card

Discover knows that you are a college student — so you do not need to have a long credit history or a high credit score. You will need to have a job with income, so that you can prove that you can afford the card.

Having a limited credit history is just fine. However, it will be much more difficult to get approved if you have missed payments or have collection items. Limited history is good, but bad history is difficult.

What We Like About the Card

At MagnifyMoney, this is one of our favorite student credit cards. Here is why.

No annual fee.

When reviewing student credit cards, the first (and most important) thing we consider is the annual fee. Fortunately, Discover does not charge an annual fee on this card. You can build your credit with all three credit bureaus without worrying about fees.

Generous cash back (that rewards the right behavior).

Discover has always been a leader in cash back, and this card is no exception. 2% cash back at gas stations and restaurants is the highest rate we have found for college students. No other card that we could find offers $20 for good grades — and we like that Discover rewards a 3.0 GPA with extra cash back.

No foreign transaction fee.

The good news is that Discover does not charge a foreign transaction fee. Unfortunately, it can be difficult to use Discover in some parts of the world.

What We Don’t Like About the Card

Interest rates are not low.

This is not unique to Discover — but most student cards charge higher interest rates because students are higher risk. Your goal with a student card is to build your credit history — not to go deeper into debt. So long as you pay your statement balance in full and on time every month, you should not have to worry about the interest rate.

Limited acceptance overseas — especially in Europe.

If you plan on studying abroad or backpacking across Europe, you might find it difficult to use your Discover card. In Asia, you get better coverage with JCB (Japan) and China UnionPay. However, in Europe you will be relying upon the Diners Club International network, which is limited.

Alternatives to the Card

Discover it Chrome is one of our favorite cards — however, it is not for everyone. Here are some other options to consider:

If You Don’t Spend Money in Gas Stations or Restaurants

The 2% cash back sounds great — but if you don’t own a car and eat all of your meals in the dining hall, Chrome might not be your best bet. You actually might want to consider another card offered by Discover, the Discover it for Students. It has all of the benefits that we like in Chrome, including Good Grade Rewards, no annual fee, and a free FICO score. With this card, earn 5% cash back in rotating categories each quarter like Amazon.com, restaurants, ground transportation and more, up to the quarterly maximum each time you activate. Plus, unlimited 1% cash back on all other purchases. With rotating categories, there is a better chance that you can earn more cash back in a category where you spend money.

If You Want to Travel Abroad

If you want to travel abroad, you should find a Visa or MasterCard option that does not charge a foreign transaction fee or annual fee. Capital One does just that with its Journey Student credit card. In addition to no annual fee and no foreign transaction fees, you can earn up to 1.25% cash back. You earn 1% when you spend, and another 0.25% if you make your payment on time.

Bottom Line: Who Benefits Most from this Card

If you are a college student with good grades (3.0 GPA or higher) who wants to build your credit score and earn some cash back along the way, this is a good card. If you spend most of your money on gas and restaurants, this becomes a great card.

Student Credit Cards: FAQs

A student card is a credit card specially designed by a lender to get college students started with credit. The major difference between a student credit card and a regular credit card is that the student card will likely have a higher interest rate. Regular cards tend to average about 15% annual interest. In a recent MagnifyMoney study, we found the average student credit card carries an interest rate of 21.4%.

Your goal with your student credit card is to build your credit so that by the time you graduate, you have a healthy credit score in the high 600s to mid 700s. That way, when you graduate, you’ll be in a great position to make larger purchases like a new car or your first home. At that point you may actually want to earn rewards, and you’ll qualify for the best cards because you have a great score.

You should really only get a credit card if you want to build your credit score, not because you need extra money to make ends meet. If you can’t afford your monthly expenses as it is, a credit card might only make things worse.

The easiest strategy is this: Set up one recurring bill (like your Netflix or Spotify account) on your card. And pay it off in full each month. Follow that advice while you’re in school and you will absolutely graduate with a great credit score.

You can still build up your credit without having to open a card on your own. Ask your parents if you can become an authorized user on their account. All of their good credit behavior will be reported on your credit report as well. Also, consider opening a secured credit card. It’s a tool that’s meant precisely to help build credit but doesn’t have the same risks as a regular credit card. Read more about secured cards here.

Lindsay VanSomeren
Lindsay VanSomeren |

Lindsay VanSomeren is a writer at MagnifyMoney. You can email Lindsay here

TAGS:

Advertiser Disclosure

Strategies to Save

The Ultimate Guide to CD Ladders

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

The Ultimate Guide to CD Ladders

CDs are a very safe investment because they come with built-in insurance. Up to $250,000 of your money at each bank is covered under the Federal Deposit Insurance Corporation (FDIC). Deposits at credit unions are also covered for the same amount by the National Credit Union Administration (NCUA).

However, CDs do have some major downsides. They’re basically just reverse loans you make to a bank, and therefore you can’t withdraw your money before the term of your loan ends without paying stiff fees.

To get around this, some people buy short-term CDs so they can have more frequent access to their money in case they need it, but these short-term CDs offer far lower returns than longer-term CDs.

It’s a big quandary: The best CD rates are for longer-term CDs, but it’s a tough commitment to lock your money up for that long.

That’s where a little-known tool called a CD ladder comes in: It provides a neat solution that allows you to invest in long-term CDs while having frequent access to your money at the same time.

What is a CD ladder?

A CD ladder is basically a series of staggered investments. Rather than putting all your money in one CD and never seeing it again for five years or longer, you split your total investment among several smaller CDs. Each one of these smaller CDs has a different term so they mature (are paid back to you with interest) at different times.

The goal with CD laddering is to plan your smaller CDs out ahead of time so you’ll have one new CD maturing at regular intervals. When this happens, you have the option to take the money out, or you can reinvest it in the coveted long-term CD.

By the end of the cycle, all of your smaller CDs will be invested in long-term CDs. One new CD will mature after each time interval. Thus, your goal is achieved: All of your money is invested in the highest-earning CDs, yet you still have frequent access to a portion of your cash.

Are CD ladders right for you?

CD ladders are a great tool for people who have a hard time saving money because they’re always pulling cash out of their savings for unplanned expenses like a spur-of-the-moment vacation or a last-minute holiday gift. CDs are essentially forced savings accounts – you can get the money out if you need it, but not without paying a price.

Each financial institution charges fees for early withdrawal. Fees can be a set dollar amount, a set number of months’ worth of interest, a set percentage of the principal (the amount you invested), a set percentage of interest (the amount you’ve earned), or a set percentage of both principal and interest.

You could still come out ahead if you’re just charged a percentage of interest, or you could end up actually owing the financial institution money if they have steeper fines. Needless to say, it’s something you should avoid at all costs – even if there’s a tempting last-minute deal on a cruise vacation.

CD ladders are also great savings tools for when you need a specific amount of money in the short term – for example, if you’re looking to save a down payment for a house five years from now, or a car in three years.

Finally, CD ladders are also great tools for people who meet two conditions: They already have money saved in an emergency fund, and they’re also saving in high-yielding investments like stocks or index funds, if they’re working on saving up for retirement.

You don’t want to keep your emergency savings in a CD ladder because if an emergency does happen, you won’t be able to pull out your money without incurring the fees described above. CD ladders are also great investment vehicles, but they don’t earn enough to allow you to really ramp up your long-term savings for things like retirement (more on that further down, though).

What are some examples of CD ladders?

The really cool thing about CD ladders is that you can customize them to fit your needs. The only two things you need to pay attention to are how frequently you want access to your money and how much you have to invest to create your own CD ladder.

All CD ladders follow the same basic principles of splitting up your total investment among multiple staggered investments. Here are two examples of CD ladders that offer you access to your money at different intervals and require different initial investments:

CD Ladder One: Short-term, smaller investment

Let’s say you only have $1,000 to invest. You could split it up into some short-term investments like this:

Start: Buy four CDs. Put $250 each into a three-month, six-month, nine-month, and one-year CD.

Every three months: One CD matures, and you can either cash it out or roll it over into a new one-year CD.

After one year: Each CD is invested in a one-year CD. Because they have staggered start times, one new CD will mature every three months.

CD Ladder Two: Long-term, larger investment

If you have $5,000 to invest, you could split it up and form a CD ladder this way:

Start: Buy five CDs. Put $1,000 each into a one-year, two-year, three-year, four-year, and five-year CD.

Every year: One CD matures and you roll it over into a new five-year CD, or you can cash it out without facing penalties.

After five years: Each CD is invested in a five-year CD. Because they have staggered start times, one new CD will mature every year.

How do CD ladders hold up compared to other investments?

It’s important to know how CD ladders stack up against other potential investments if you’re using them to save money. So we decided to compare an initial $5,000 investment over 10 years to see how CD ladders compare to other options.

It’s also important to take inflation into account when looking at your returns over several years, because this has a real impact on how much your money will be worth. If you started out with $5,000 in 2006, you’d need exactly $6,071.02 today to have equal buying power today, thanks to inflation.

Let’s see how our investments pan out:

CD Ladder

Let’s consider the long-term, larger investment CD ladder structure from above and use the highest rates from MagnifyMoney’s CD comparison tool.

To start out, you’d put $1,000 each into a one-year, two-year, three-year, four-year, and five-year CD. For the next five years, one of these CDs will mature annually, and you will roll it over into a new five-year CD. By the time five years is up, all of your CDs will be in high-interest-earning CDs, with one maturing annually. Then we’ll continue rolling them over into five-year CDs for five more years, for a total of 10 years’ worth of rollovers.

Risk: Very safe because it’s backed by the FDIC or NCUA. You can also take advantage of higher interest rates if they go up.

Reward: $1,019.61. You’d need to make more than $1,071.02 to counter the effect of inflation, though, so your inflation-adjusted returns would be worth –$51.41 ($1,019.61 – $1,071.02).

Two Five-Year CDs

Let’s find out what happens if you take the initial $5,000 investment but put it into two back-to-back five-year CDs instead of laddering it.

Risk: Again, very safe because it’s backed by the FDIC or NCUA. However, you can’t take the money out as frequently if you need it, and you’ll only be eligible to take advantage of rising interest rates once when you roll it over into another CD.

Reward: $1,026. You’ll come out –$45.02 after taking inflation into account ($1,026 – $1,071.02).

Stock Market

The stock market is traditionally the best way to go for long-term gains. We wanted to know how much extra money you would have in 2016 if you invested $5,000 in the stock market way back in 2006. We looked at the average annual inflation-adjusted stock market return (7.92%), compounded annually over 10 years.

Risk: High; you could lose a significant portion of your money in the short term, and it can take a while to build it up again.

Reward: $10,715. This has already been adjusted for inflation, and so represents the real value of your money in 2016.

Savings Account

Most people like to save up money in a plain old savings account. We looked at what would happen to your money if you kept $5,000 in a savings account for 10 years. We used the rates from MagnifyMoney’s savings account comparison tool to find the highest-yielding A-rated bank (Ridgewood Savings Bank, 1.05% APY) and calculated returns using daily compounding.

Risk: Very safe because it’s backed by the FDIC or NCUA.

Reward: $554. You’ll come out –$517.02 after taking inflation into account ($554 – $1,071.02).

Under Your Mattress

Our grandparents might have squirreled away money under their mattress, but now that might not be the greatest idea. Here’s what would happen if you just kept $5,000 completely in cash for 10 years.

Risk: Very unsafe. It can easily be stolen or lost in a house fire.

Reward: $0. You’ll come out –$1,071.02 after taking inflation into account ($0 – $1,071.02).

CD ladder FAQs

  1. How can I find the best rates on CDs?
    You can use MagnifyMoney’s CD comparison tool to find the best rates across the country for CDs of various term lengths.
  2. What are the shortest and longest possible CD terms?
    Generally, three months is the shortest term offered while five or even 10-year CDs are the maximum terms.
  3. Will I owe taxes on my money?
    Yes. You are taxed on your interest earning just like a regular savings account. Your bank will issue you a 1099-INT form at the end of the year.
  4. What if interest rates change?
    You won’t be affected unless you possess either a callback or a bump-up CD. Callback CDs allow the bank to cancel your CD and return your principal and any yields to you if interest rates fall. Bump-up CDs give you the option to boost your interest rate once per term if interest rates rise.

Certificates of deposit (CDs) are a great way to diversify your portfolio. They’re easily available because just about every bank and credit union offers them, there are no tacked-on fees to buy them, and they’ll often earn much more interest than a regular savings account.

Lindsay VanSomeren
Lindsay VanSomeren |

Lindsay VanSomeren is a writer at MagnifyMoney. You can email Lindsay here

TAGS: ,