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College Students and Recent Grads

Facing Private Student Loan Default? Here Are Your Options

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

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While federal student loans come with a number of flexible repayment plans, private loans typically aren’t so forgiving. So if you’re struggling to pay your bills, it can be tougher to avoid private student loan default than it would be with federal debt.

To make a bad situation worse, defaulting on private student loans (or any loans, for that matter) comes with some nasty consequences. Your credit score could be seriously damaged, for instance, and you might end up in court.

But while the consequences of defaulted private student loans are serious, they’re also solvable. Here’s what you need to know about private student loan default and how to prevent it if it hasn’t yet occurred.

What causes private student loan default?

If you’ve got student debt, you know that not paying them could lead to default. But missed payments aren’t the only action that results in defaulted private student loans. Here are three reasons your school debt could go into default status.

1. You missed payments

As with federal student loans, private loans go into default if you don’t pay your bills. But while the federal government allows for a 270-day delinquency period before your unpaid loans are placed default status, private lenders don’t give this much wiggle room.

Some allow for three to four months of delinquency before reporting your loan as defaulted; others will label your loan as defaulted after a single missed payment.

2. Your cosigner declares bankruptcy or dies

If you borrowed private student loans for your undergraduate education, chances are you applied with a cosigner, such as a parent. Because your cosigner shares this debt, their actions can affect its status.

Even if you’re making on-time payments, your loan could potentially be considered in default if your cosigner declares bankruptcy, and in some cases it automatically goes into default if the cosigner passes away.

3. You declare bankruptcy or default on other debts

Finally, your private student loan could enter default if you file for bankruptcy or default on other debts. Even if you’re paying your student loan on time, these other financial events could trigger default. If you’re in this situation, speak with your lender or examine your student loan contract to see what could happen.

7 consequences of defaulting on private student loans

If any of these events trigger private student loan default, here’s what could happen next.

1. Your lender demands full and immediate repayment

Chances are, you defaulted on your private student loans because you couldn’t afford monthly payments. But, ironically, defaulting means your lender will likely demand full and immediate repayment of the entire loan.

Because you missed payments, your original repayment plan becomes null and void. Since this agreement is canceled, the lender may ask you to repay the debt in full.

Of course, you probably aren’t able to pay back the entire loan all at once, so you’ll need to find other ways to fix this situation.

2. Your credit score will plummet

Your lender will report your defaulted private student loan to the credit bureaus. Since a big part of your credit score is based on on-time repayment of debt, your score will likely take a serious hit.

This red mark will show up on your credit history, making it difficult to take out another loan or get other forms of credit in the future. In most cases, negative marks can stay on your credit for up to seven years, unless you’re able to file a successful dispute and get them removed.

3. Your loan could get sent to collections

After you default, your lender might send your loan to a collections agency. Once this happens, expect to get lots of calls and mail from collections agents requesting repayment.

That said, it’s illegal for collections agents to harass you — for example, they’re not supposed to contact you before 8 a.m., after 9 p.m., or at work if you’ve asked them not to. Protect yourself by understanding your rights as a borrower.

4. You might owe additional collections fees

If your loan gets sent to collections, you might get charged extra fees. Whether set by your initial contract or state law, these fees could make your debt even more expensive, sometimes even adding 25% to 40% to your balance.

5. You could get sued

If you don’t respond to attempts to collect the debt, your debt collector could bring you (and your cosigner) to court. This is more common if the lender thinks you have the means to pay back your loan but are choosing not to (and less common if you truly are in dire financial straits).

Once in court, the lender will have to verify that your debt is legitimate with the right documentation. If the debt collector wins, it could take more extreme action to collect your money.

6. You might face wage garnishment or property liens

Let’s say you go to court and lose. If it gets the appropriate court order, the debt collector could actually garnish your wages or seize your assets. This could mean it puts a lien against any property you own or a financial levy on your bank accounts.

7. You might run out the clock on your debt’s statute of limitations

As you can see, the consequences of defaulting on private student loans can get extremely serious, even leading to wage garnishment or withdrawals from your bank account. But don’t forget that you have rights as a borrower, one of which involves a statute of limitations on debt.

These statutes of limitations vary by state and typically range from three to 10 years for private student loans. Once the time limit is up, the lender can’t take any legal recourse against you.

Of course, waiting out the clock on your student debt is seriously risky for all the reasons mentioned above. Plus, you must be careful not to reset the clock on the statute of limitations. If you resume repayment at any time, for instance, the clock could start again from zero.

How to prevent defaulting on student loans

If you’re worried about falling behind on private student loan payments, here are four actions that could help your situation.

1. Try to postpone payments through temporary forbearance

Let’s say you can’t pay back your private student loan because you lost your job or are going back to school. While private lenders don’t have the same flexible repayment plans as the federal government, some will let you temporarily postpone payments through forbearance.

Although interest will continue to accrue, pausing payments could give you the relief you need until you get back on your feet. You’ll be able to stop making payments for a while without worrying about going into default. If you’re struggling, talk to your lender about temporary forbearance or deferment.

2. Speak with your lender about reduced monthly payments

Even if your lender won’t let you pause payments completely, they might be willing to reduce your monthly payments for a period of time. After all, they’d rather have you pay something on your debt than stop making payments completely.

Whether it’s interest-only payments or another adjusted amount, ask about your options. Even if the lender doesn’t list alternative payment plans on its website, it’s always worth calling to see if it can be accommodating.

3. Refinance your student loans for new terms

One surefire way to restructure your debt with new terms and monthly payments is through student loan refinancing. When you refinance, you can choose a new repayment plan, often between five and 20 years.

If your bills are burdensome, a longer plan could be the solution you need. Even though you’ll probably pay more interest over the life of your loan, the lower monthly payments could make your debt easier to manage.

That said, not everyone will qualify for student loan refinancing. You’ll need to pass a credit and income check to qualify for refinancing, or apply with a cosigner who can.

4. Explore student loan repayment assistance programs

While private student loans aren’t eligible for federal forgiveness programs, like Public Service Loan Forgiveness, they might qualify for private- or state-run loan repayment assistance programs (LRAPs). These programs typically offer thousands of dollars in loan assistance in exchange for working or living in a certain area.

Some employers also offer a student loan matching benefit, which could help you get rid of your debt faster. If you’re job searching, consider applying to a company that could help you pay off your student loans.

Already defaulted? 3 steps that could help

The steps above can help you avoid private student loan default, but here’s what you can do if it’s already happened.

1. Dispute the debt

Maybe debt collectors are ringing your phone off the hook, but something feels wrong. If you’re not convinced you owe this defaulted private student loan, it could be worth disputing the debt.

As long as you make your dispute within 30 days of hearing from a debt collector, that collector will be legally obligated to provide full verification of the loan’s originations.

If the collector can’t provide this documentation — or if you discover a mismatch with your own records — you could be able to prove the debt is invalid or you don’t owe as much as the collector claims.

2. Pay your loan back in full

Although full and immediate repayment is probably unrealistic for most borrowers, it is worth mentioning as a way to get out of default. Paying off your entire balance at once will stop the default. If you’ve saved up a large sum or get an unexpected windfall, consider throwing it at your debt to get out of default once and for all.

3. Speak with a student loan lawyer

Finally, consulting a student loan lawyer could be a helpful step. The lawyer could help you understand your options, and explain how your particular state treats defaulted private student loans. It could especially be smart to consult a lawyer if the debt collector has summoned you to court.

And if you don’t have the funds to pay for legal aid, you may be able to find low-cost or free assistance via the Amercian Bar Association’s pro-bono listings or the Legal Services Corporation.

Try your best to avoid defaulting on private student loans

In recent years, some borrowers have intentionally defaulted on their private student loans in protest over the student loan crisis burdening millions of Americans. But whatever you think of the financial situation we’re in, defaulting on your student loans could cause more harm than good.

As you can see, defaulting can damage your credit for years, and invite frequent calls and letters from debt collectors. You could even be brought to court, where a lender could get the right to withdraw money straight from your bank account.

Outside of these financial and legal repercussions, defaulting on student loans is sure to cause a ton of stress and anxiety. So if you’re struggling to pay your bills, try your best to speak with your lender before default occurs.

By keeping open communication, hopefully you and your lender can agree to a repayment plan that keeps your loan in good status without it being too much of a burden on your bank account.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Rebecca Safier
Rebecca Safier |

Rebecca Safier is a writer at MagnifyMoney. You can email Rebecca here

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College Students and Recent Grads

Top Checking Accounts for College Grads

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Top Checking Accounts for College Grads
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For many college students, their default banking option while in school is a student checking account, which is typically free. Unfortunately, when you graduate you lose those benefits. Many student checking accounts will begin to charge you monthly maintenance fees unless you meet certain requirements.

So, where do you go from there?

Few young adults would turn to their parents for fashion or dating advice and, yet, one of the most common ways we’ve found young people choose their bank account is by going with whichever bank their parents already use. This could be a bigger faux pas than stealing your dad’s old pair of parachute pants.

The bank your parents use may carry fees or have requirements that don’t meet your lifestyle or budget, and make accounts expensive to use.

But where do you even begin to choose the right checking account?

When you’re nearing graduation, start planning your bank transition.

Many banks send a letter in the mail a few months prior to your expected graduation date informing you that your student checking account is going transition to a non-student account. If you’re not careful and you disregard the letter, you may be transitioned into an account that charges a fee if you don’t meet certain requirements.

You can always call the bank and ask to switch to a different account or you can choose a new account that offers more benefits, like interest and ATM fee refunds.

Account Name

Minimum Monthly Balance

Amount to Open

ATM Fee Refunds

APY

SoFi Money$0$0Unlimited1.80%
Empower Checking Account$0$0One out-of-network ATM withdrawal per month1.65%
Aspiration Spend and Save Account$0$10Unlimited1.00% APY
TAB Bank Kasasa Cash Rewards Checking$0$0Up to $15 in ATM fees reimbursed4.00% APY (applies to balances up to $50,000)
Orion Federal Credit Union Premium Checking$0$0$10 per month4.00% (applies to balances up to $30,000)
La Capitol Federal Credit Union Choice Plus Checking$0$50Up to $25 per month4.25% APY on balances up to $3,000

2.00% APY on balances $3,000-$10,000

The 5 key things you should look for in a checking account

When you’re shopping around for a new checking account, there are several things you should look for to ensure you’re getting the most value from your account:

  1. A $0 monthly fee: Sometimes banks may say they don’t charge a monthly fee but read the fine print — they may require a minimum monthly balance in order to avoid it. There are plenty of free checking accounts available for you to open, so there’s no reason to stay stuck with an account that charges a monthly fee. Take note, as some accounts may require you to meet certain criteria to maintain a free account like using a debit card, enrolling in eStatements or maintaining a minimum daily balance.
  2. No minimum daily balance: Accounts without minimum daily balances mean you can have a $0 balance at any given time. This may allow you to have a free account without meeting balance requirements — although other terms may apply to maintain a free account.
  3. Annual Percentage Yield: APY is the total amount of interest you will earn on balances in your account. Opening an account that earns you interest on your balance is an easy way to be rewarded for money that would typically sit without earning anything. You should definitely aim to earn a decent APY on your savings account.
  4. ATM fee refunds: You may not be able to access an in-network ATM at all times, so accounts providing ATM fee refunds can reimburse you for ATM fees you may incur while using out-of-network ATMs. Those $3 or $5 charges add up!
  5. No or low overdraft fees: Most banks charge you an overdraft fee of around $35 if you spend more money than you have available in your account. Therefore, it’s a good idea to choose an account that has no or low overdraft fees.

Top overall checking accounts for college grads

For the top overall checking accounts, we chose accounts that have no monthly service fees, no ATM fees, refunds for ATM fees from other banks, interest earned on your deposited balances and with strong mobile banking apps. While there is no all-inclusive account that contains every benefit, the accounts below are sure to provide value whether you want a high interest rate, unlimited ATM fee refunds or 24/7 live customer support.

1. SoFi Money

Better known for its personal loan products, SoFi has recently launched a cash management account product that offers an attractive yield of 1.80% APY. Unlike some other cash management accounts, the rate applies to the entire balance, with no need to shift funds between checking and spending sub-accounts. Among it’s best perks are unlimited reimbursement of third-party ATM fees, even from overseas withdrawals.

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2. Empower Checking Account

Empower is the mobile banking division of Evolve Bank & Trust. The Empower Checking Account currently offers a very attractive 1.65% APY on your full checking account balance, with neither a minimum deposit to open nor any need to maintain a minimum balance. Empower gives you access to over 25,000 fee-free ATMs nationwide, however you’ll only get one out-of-network ATM fee reimbursed per month. One other drawback: There are no check-writing capabilities with this account.

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Member FDIC

3. Aspiration Spend and Save Account

The Aspiration Spend and Save Account offers a wide range of benefits for account holders and has few fees. The $10 amount to open is fairly low, and once you open your account there is no minimum monthly balance to maintain.

Aspiration charges no fees for withdrawals outside its ATM network, plus it refunds an unlimited amount of third-party ATM fees.

As the account name suggests, there are two sides to the account: a spending sub-account and a savings sub-account. The spending side yields no interest, while the savings side earns 1.00% APY. To earn this APY, you must deposit at least $1,000 in the combined account monthly, or maintain a balance of $10,000.

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on Aspiration’s secure website

Top high-yield checking accounts for college grads

Since most checking accounts offer little to no interest, high-yield checking accounts are a great way for you to maximize the money that typically would just sit in your account without earning interest. These accounts often offer interest rates that fluctuate depending on how much money you have in the account. However, in order to earn interest, there are some requirements that you may have to meet such as making a certain number of debit card transactions and enrolling in eStatements.

1. TAB Bank Kasasa Cash Rewards Checking Account

Based in Ogden, UT, TAB Bank’s Kasasa Cash Checking account is a great choice for recent graduates. You can earn a very competitive 4.00% APY by meeting a few simple requirements: Have at least one direct deposit, ACH payment, or bill pay transaction posted to the account during each billing cycle; and make at least 15 debit card purchases. Even better, the bank will reimburse up to $15 in ATM fees per month from making withdrawals outside their ATM network.

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on TAB Bank’s secure website

Member FDIC

2. Orion Federal Credit Union Premium Checking

An excellent choice for recent graduates looking for a high-yield checking account is Orion Federal Credit Union’s Premium Checking account, which promises customers 4.00% APY on balances up to $30,000.

You also need to keep in mind that because Orion FCU is a credit union, you have to jump through some additional hoops to access the high APY:

  • Pay $10 to one of five organizations approved by Orion to become eligible for membership in the credit union
  • Deposit $25 in a special savings account with Orion to officially become a member
  • Make an electronic deposit of at least $500 every month into your Premium Checking account
  • Make at least 8 signature based debit card transactions — not PIN-code based debit transactions — each month.

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on Orion Federal Credit Union’s secure website

NCUA Insured

3. La Capitol Federal Credit Union Choice Plus Checking

This checking account has a $2 monthly service fee, which can easily be waived if you enroll in eStatements.

*While the terms state a minimum balance requirement of $1,000 and a low balance fee of $8, the fee can be waived if you make 15 or more posted non-ATM debit card transactions per month.

To earn the top interest rate on your checking balance, you just need to make at least 15 or more posted non-ATM debit card transactions per month. There are numerous surcharge-free La Capitol ATMs for you to use, and after signing up for eStatements you can receive up to $25 per month in ATM fee refunds when you use out-of-network ATMs.

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on La Capitol Federal Credit Union’s secure website

NCUA Insured

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

James Ellis
James Ellis |

James Ellis is a writer at MagnifyMoney. You can email James here

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Best of, College Students and Recent Grads, Credit Cards

Best Student Credit Cards October 2019

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any credit card issuer. This site may be compensated through a credit card issuer partnership.

Getting a credit card while you’re in college can set you up for financial success, provided you avoid racking up unnecessary charges. If you are over 18 and have a steady income, applying for a card now will kick start your credit history, and you can start building that all-important credit score.

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® Student Cash Back

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Rates & Fees

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Discover it® Student Cash Back

Annual fee
$0
Rewards Rate
5% cash back at different places each quarter like gas stations, grocery stores, restaurants, Amazon.com and more up to the quarterly maximum each time you activate, 1% unlimited cash back on all other purchases - automatically.
Regular APR
14.74% - 23.74% Variable
Credit required
fair-credit
Fair/New to Credit

Magnify Glass Pros

  • Good Grades Reward program: Did you study extra hard this year? If you’ve gotten a 3.0 GPA or higher for an entire school year, Discover will reward you with an extra $20 statement credit. You can get this statement credit for up to five years in a row as long as you’re still a current student when you apply.
  • Free FICO® score: Just like how you have grades for your classes, your FICO® score is your “grade” for your credit. Credit cards have a huge effect on your FICO® score. You can watch how your new credit card affects your score over time with a free FICO® score update on your monthly statement.
  • 5% cash back : You can earn up to 5% cash back at different places that change each quarter, on up to $1,500 in purchases every quarter that you activate. Past categories have included things like Amazon purchases, restaurants, and ground transportation. Even if you don’t buy something in the bonus category, you’ll still earn 1% cash back on all other purchases.
  • Cash back match at end of your first year: In addition to rotating 5% cash back categories, new cardmembers will also get an intro bonus. When your first card anniversary comes around, Discover will automatically match your cash back rewards you earned during your first year.

Cons Cons

  • Remember to sign up for bonus categories: Even though this card comes with a great cash back rewards program, it comes with a catch: you’ll need to manually activate the bonus places each quarter. You can do this by calling Discover or logging in to your account online. If you forget, you’ll still earn 1% cash back if you make any purchases in the qualifying categories.
  • Gift certificates only available at certain levels: You can redeem your rewards for many things such as Amazon purchases, a statement credit, or a donation to a charity, to name a few. But, if you’d like to get a gift card instead, you’ll need a cash back balance of at least $20 saved up in your account.
Bottom line

Bottom line

The Discover it® Student Cash Back offers great perks for college students, such as a rewards program for good grades and a free FICO® score so you can learn about your credit firsthand. Its cash back rewards program is our favorite. No other card for students (that we could find) offers the opportunity to earn up to 5% cash back. And with no annual fee, this is our top pick.

Read our full review of the Discover it® Student Cash Back

Magnify Glass Pros

  • 1.25% cash back if you pay on time: Each purchase you make earns a flat-rate 1% Cash Back on all purchases; 0.25% Cash Back bonus on the cash back you earn each month you pay on time. This makes it handy for people who want as simple a card as possible. And it rewards great behavior.
  • Higher credit lines after on-time payments: If you’re approved for this card, you’ll receive a credit line of at least $300. If you make five on-time payments in a row, you can call Capital One and ask them to increase your credit line.
  • No foreign transaction fee: This is a great card to take overseas, because you won’t have to pay any foreign transaction fees. Most cards charge an average 3% foreign transaction fee, but Journey allows you to use your card abroad without being charged extra fees.

Cons Cons

  • High APR: This card carries an APR of 26.46% (Variable). That’s almost twice as high as some other student credit cards, such as the Wells Fargo Cash Back CollegeSM Card with a rate as low as 12.90% - 22.90% Variable APR. It’s just one more incentive to pay off your bill in full each month.
Bottom line

Bottom line

We really like this card because it actively rewards you for developing good credit-management behavior by offering a small cash back bonus for on-time payments. In addition, the cash back program is straightforward with no confusing categories to remember or opt into, making this card a good option for students who want a simple, flat-rate card.

Read our full review of the Journey® Student Rewards from Capital One®

Best Intro Bonus

Wells Fargo Cash Back CollegeSM Card

The information related to Wells Fargo Cash Back CollegeSM Card has been collected by MagnifyMoney and has not been reviewed or provided by the issuer of this card prior to publication. Terms Apply.

Wells Fargo Cash Back CollegeSM Card

Annual fee
$0
Rewards Rate
3% cash rewards on gas, grocery, and drugstore purchases for the first 6 months, 1% cash rewards on virtually all other purchases
Regular Purchase APR
12.90% - 22.90% Variable
Credit required
excellent-credit
Good/Excellent

Magnify Glass Pros

  • Interest rates as low as 12.90% - 22.90% Variable APR: Depending on your credit, your interest rate could be between 12.90% - 22.90% Variable APR, but there is no guarantee you’ll receive the lower rate. This is a lower variable APR range than most student cards, and can help if you aren’t able to pay your balance in full one month.
  • Intro Rewards Bonus: 3% cash rewards on gas, grocery, and drugstore purchases for the first 6 months, 1% cash rewards on virtually all other purchases
  • Access to credit education: Wells Fargo provides you with all sorts of tools and information to learn about things like credit, budgeting, and expense tracking. While this is a nice feature, it’s not exclusive to Wells Fargo. You can get this information from free tools such as Mint, or even reading books and blogs. But it is pretty handy having it right at your fingertips when logged in to your account.

Cons Cons

  • Need to be a Wells Fargo member to apply online: You can go into any one of the 6,000+ branches and apply for the card. You can also apply online, but you’ll need to be an existing Wells Fargo customer. However, anyone can open a checking account online with a minimum deposit of $25.
  • High bars for some cash back redemption options: There are a lot of redemption options available through Wells Fargo’s own online cash back rewards mall. However, if you’d just like straight cash, you have a few options. You can request a direct deposit into your Wells Fargo checking account, savings account, or Wells Fargo credit card (if applicable) in $25 increments, or request a paper check in $20 increments. That can take a long time to accumulate if you’re not spending much with your card.
Bottom line

Bottom line

The Wells Fargo Cash Back CollegeSM Card is a relatively simple card with a great intro bonus of 3% cash rewards on gas, grocery, and drugstore purchases for the first 6 months, 1% cash rewards on virtually all other purchases In addition, the low variable APR is handy for those who think they’ll be carrying a balance on their credit card from month to month at some point in the future. This is generally something we recommend against, but if you can’t avoid it, the Wells Fargo Cash Back CollegeSM Card is your best bet.

Read our full review of the Wells Fargo Cash Back CollegeSM Card

Bank of America® Travel Rewards Credit Card for Students

Magnify Glass Pros

  • Unlimited rewards. Earn unlimited 1.5 points for every $1 you spend on all purchases everywhere, every time and no expiration on points.
  • Flexible rewards redemption. You can redeem your points for a statement credit to pay for flights, hotels, vacation packages, cruises, rental cars or baggage fees. Plus, this card doesn’t restrict you to a particular airline or chain of hotels.
  • Free FICO score. Keep track of your credit score via online banking or Bank of America’s mobile app.
  • Chance to earn more rewards. Have an active Bank of America checking or savings account? Then this card offers a chance to get a 10% customer points bonus on every purchase. The card is also eligible for the benefits of the Preferred Rewards program, though that program is based on banking and/or investment balances that might be too high for many college students to qualify for.
  • Foreign transaction fee? There is None.

Cons Cons

  • Points are not worth as much when redeemed for cash back. When redeemed for a travel credit, each point is worth $0.01. However, if redeemed for cash back, points are only worth $0.006 each. For example, 2,500 points redeemed for travel would be worth $25. The same number of points redeemed for cash back would be worth $15.
Bottom line

Bottom line

If you’re looking for a student card offering travel rewards, the Bank of America® Travel Rewards Credit Card for Students could be a good option. With an annual fee of $0 and points that can be redeemed for travel with any airline or stays with any hotel line, this card gives you options.

The information related to Bank of America® Travel Rewards Credit Card for Students has been collected by MagnifyMoney and has not been reviewed or provided by the issuer of this card prior to publication.

Best Credit Union Card

Altra Federal Credit Union Student Visa® Credit Card

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on Altra’s secure website

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Altra Federal Credit Union Student Visa® Credit Card

Annual fee
$0
Rewards Rate
Earn double Reward Points on every dollar of purchases in the first 60 days after opening your new account, then 1 point per dollar spent.
Regular Purchase APR
15.90% Fixed

Magnify Glass Pros

  • $20 reward for good credit card usage: If you can maintain your account in an “exceptional way” for your first year, you’ll get a bonus $20 reward on your card’s anniversary. All you have to do is not have any late payments, don’t charge over your card’s limit, and use your card for at least six out of twelve months.
  • Up to $500 random winner each quarter: It’s like playing the lottery, except you don’t have to buy a lottery ticket. Each quarter Altra will choose one student cardholder at random and pay back all of their purchases from the previous month, anywhere between $50 to $500.
  • Earn rewards: For the first 60 days after you open your account, you’ll earn 2 points per dollar spent. After that you’ll earn 1 point per dollar spent. You can redeem these points for cash back, merchandise through their online rewards mall, or travel.
  • Redeem points for a lower interest rate: If you’ll need a car in the future, this might be a good credit card to get. You can trade in 5,000 points for a 0.25% reduction, or 10,000 points for a 0.50% reduction on an auto loan through Altra Federal Credit Union. That could end up saving you a ton of cash in the long run.

Cons Cons

  • 1.00% of each transaction in U.S. dollars foreign transaction fee: This is definitely one card to leave at home if you’ll be traveling or studying abroad. Most credit cards charge a 3% foreign transaction fee, so this is on the low side. Still, it’s not too hard to find a student credit card with no foreign transaction fee, such as the Discover it® Student Cash Back or the Journey® Student Rewards from Capital One® card.
  • Must join Altra Federal Credit Union: Luckily, anyone can join, but it might take a bit of legwork on your part compared to a bank. If you don’t meet certain membership eligibility criteria, you can join the Altra Foundation for $5. Then you’ll need to open a savings account with a minimum $5 deposit that must remain in the account while you have your card open.
Bottom line

Bottom line

If you’re a student who doesn’t mind working with a credit union, Altra provides a card that has several rewards benefits. This card is a good option if you may be taking out an auto loan in the next few years, since you’ll benefit from a reduced interest rate by trading in your rewards points. In addition to earning rewards, using this card responsibly can help you build credit.

Read our full review of the Altra Federal Credit Union Student Visa® Credit Card

Best Secured Card

Discover it® Secured

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on Discover Bank’s secure website

Rates & Fees

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Discover it® Secured

Annual fee
$0
Minimum Deposit
$200
Regular APR
24.74% Variable
Credit required
bad-credit
New/Rebuilding

Magnify Glass Pros

  • Cashback program: This card has a feature uncommon to other secure cards — a cashback program. You earn 2% cash back at restaurants or gas stations on up to $1,000 in combined purchases each quarter. Plus 1% cash back on all other credit card purchases.
  • Cashback Match™: Discover will match ALL the cash back you’ve earned at the end of your first year, automatically. There’s no signing up. And no limit to how much is matched (new cardmembers only). This is a great added bonus that increases your cash back in Year 1.
  • Automatic monthly reviews after eight months: Discover makes it easy for you to transition to an unsecured card with monthly reviews of your account starting after eight months. Reviews are based on responsible credit management across all of your credit cards and loans.

Cons Cons

  • Security deposit: You need to deposit a minimum of $200 in order to open this card, which is pretty standard for a secured card. This will become your credit line, so a $200 deposit gives you a $200 credit line. If you want a higher credit limit, you need to increase your deposit. The security deposit is refundable, meaning you will receive your deposit back if you close the card, as long as your account is in good standing.
Bottom line

Bottom line

The Discover it® Secured is great for students who want to build credit. This card easily transitions you to an unsecured card when the time is right, and you can earn cash back. With proper credit behavior, you’ll soon be on your way to an unsecured card.

Read our full review of the Discover it® Secured

Best for No Credit History

Deserve® EDU Mastercard

APPLY NOW Secured

on Deserve’s secure website

Deserve® EDU Mastercard

Annual fee
$0
Rewards Rate
1% unlimited cash back on ALL purchases
Regular Purchase APR
20.49% Variable
Credit required
bad-credit
Fair/Good Credit or No Credit

Magnify Glass Pros

  • No credit history required: You can qualify for this card without any credit history, making this a great option for students new to credit. You don’t even need a Social Security number when applying.
  • Reimbursement for Amazon Prime Student*: This card will reimburse you for the cost of a year of Amazon Prime Student (valued at $49). You need to charge your membership to this card to qualify, and you will not be reimbursed for subsequent years’ membership fees.
  • No foreign transaction fee: Whether you travel abroad or study abroad, you can rest easy: There are no foreign transaction fees with this card.

Cons Cons

  • Low cash back rate: The rewards program has a subpar 1% unlimited cash back on ALL purchases. You can do better with some of the other cards mentioned in this post. Though as a student, rewards shouldn’t be your primary focus — instead, build your credit so you can qualify for better non-student cards.
Bottom line

Bottom line

The Deserve® Edu Mastercard for Students is a great choice for students who are looking to build credit. Deserve markets their cards for those who may have trouble qualifying for credit, and students who fall into this category may more easily qualify for this card than for cards from traditional banks. You can earn cash back, and receive a great promotional offer of a year of Amazon Prime Student for free*.

The information related to Deserve® Edu Mastercard for Students has been collected by MagnifyMoney and has not been reviewed or provided by the issuer of this card prior to publication.

Also ConsiderAlso Consider

Golden 1 Platinum Rewards for Students

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. Anyone who lives or works in California is eligible for credit union membership.

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 may choose to hold on to your student card since it might be your oldest credit account and this can play a part in your credit score. If you close your student credit card account, it will reduce your average age of credit accounts and could hurt your credit score. Instead of closing the account, you can ask your student card issuer if there is an option to upgrade your card.

Here is a summary of our favorite cards:

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Lindsay VanSomeren
Lindsay VanSomeren |

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