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If you are a college student looking to build credit, the Journey® Student Rewards from Capital One® could be a good option. Most important, there is a $0 annual fee and Capital One is willing to accept people with Average/Fair/Limited (or no) credit history. Although your credit limit will start out very low, Capital One promises a review of the limit after a short five short months — and good behavior can be rewarded with a higher credit limit. Cash back rewards are a nice added bonus, making this a good first credit card choice. Just make sure you don’t borrow with this card — at 26.74% (Variable) APR, the interest rate is high. The Journey® Student Rewards from Capital One® is featured as one of our recommendations for best student credit cards of January 2020.
Capital One is one of the largest credit card issuers in the country. With Journey® Student Rewards from Capital One® it has created a credit card specifically designed for students looking to build their credit score and have access to the convenience of paying by credit card.
Capital One created the concept of “low and grow.” That means you will receive a very low credit limit at first (that could be as low as $500). If you demonstrate good behavior, your credit limit will grow over time. Capital One promises a review after just five months. If you make your first five monthly payments on time, you will be rewarded with a higher credit limit quickly.
The card also comes with a decent cash back rewards proposition. You will earn 1% Cash Back on all purchases; 0.25% Cash Back bonus on the cash back you earn each month you pay on time. That means responsible cardholders will earn 1.25% cash back. In general, MagnifyMoney does not get excited about rewards for student cards. Because the limit is so small, the amount of cash back that you can earn will be limited. However, 1.25% cash back on all purchases is a nice added bonus for students.
There are a few extra perks with this card. There is no foreign transaction fee, which is great for any student looking to study abroad or backpack across Europe. You will also be able to see your CreditWise® credit score for free. CreditWise offers free access to your TransUnion VantageScore 3.0 credit score. Almost every credit card issuer now offers access to a free credit score (making the benefit less exciting). However, because the goal of a student card is to build your credit score, being able to watch it improve in real time is a nice benefit. We also like that, with CreditWise, you have access to interactive tools that let you see how your behavior will impact your score over time.
Just remember: your goal with a student card is to have an excellent score (above 700) when you graduate from college. To do that, you should focus on three steps. First, use your card every month. Second, try to keep your statement balance below 10%-20% of your credit limit. That means if you have a $500 credit limit, don’t spend more than $50-$100 a month on the card. That keeps your utilization low. Third, pay your statement balance in full and on time every month. By doing this, you avoid paying any interest. With this card — you also get the full 1.25% cash back. And, most important, you build a strong credit history.
Although this card targets students, you do not actually need to be a student in order to get the card. Capital One makes it clear that this card is for people with “Average/Fair/Limited” credit. In particular, people with average credit have limited credit history. If you have had a credit card for less than three years, you would be considered “average.” If you have no credit or are new to the country, you would also be considered average by Capital One.
In order to be approved, you will need to have income. Because students are being targeted with this card, the income requirements will be much lower than for a normal card. However, if you don’t have a way of repaying your card, you will not be able to get one. And a parental allowance is not considered income.
Just remember: Because Capital One will accept people with limited or no credit history, the credit limit will be low and the interest rate will be high.
We believe this card could be a great choice for a college student looking to build credit. Here is what we like most.
$0 annual fee.
As a college student, every penny counts. And no college student should have to pay a fee to build their credit score. Fortunately, there are a number of credit card companies willing to offer student credit cards with no annual fee, and Journey® Student Rewards from Capital One® is one of them.
No foreign transaction fees.
Although the primary reason you get a student card is to build your score, having a card can be particularly helpful — especially if you are studying or traveling abroad. Foreign transaction fees of 3% or more can end up costing a lot of money. Fortunately, Capital One does not charge foreign transaction fees, and you can use your card overseas without worrying about annoying fees.
Rewards good behavior.
With your first credit card, it is important to start building responsible money habits. This card rewards good behavior. If you make your payments on time, you get a 25% boost in the cash back that you earn. And if you consistently make your payments on time, your credit limit will be increased (which can help you with your credit score, when used responsibly).
And yes, you get rewards.
When selecting a credit card, paying no annual fee is the most important feature. Although we wouldn’t recommend selecting a student credit card based upon cash back or miles, it is a nice added perk for the Capital One card. If you have a $500 limit and do not spend more than $100 a month on the card, you will only earn $15 of cash back per year (at the 1.25% rate). And we do not recommend spending more money to get more cash back — that is a bad strategy.
Very high interest rate.
The credit card charges an APR of 26.74% (Variable) to everyone who is accepted. College students have enough to worry about with student loans — they shouldn’t be taking on additional debt as very high, double-digit rates of interest. If you max out a $500 limit and pay only the minimum due, you would end up spending $84 of interest during the first year alone, and would still have a $284 balance remaining. In other words, most of your money would go toward the interest. Just beware: a student credit card is a very expensive way to borrow.
Expensive late fees.
If you miss a payment, you will be hit with a late fee of up to $35. That is a steep price to pay for anyone, let alone a college student. To avoid late fees, make sure you set up automatic monthly payments.
There are a number of other options out there. We think you should avoid any student card that charges an annual fee. But here are two good options that don’t charge a fee.
If You Want to Earn More Rewards
If you want to earn more cash back, Discover is our favorite option. Discover it® Student Cash Back has a $0 annual fee and provides free access to your FICO® score. And it does something we really like: it offers a “Good Grades Reward.” You will get $20 statement credit each school year your GPA is 3.0 or higher for up to the next 5 years. That is on top of a cash back rewards program that earns 5% cash back at different places each quarter like gas stations, grocery stores, restaurants, Amazon.com, or wholesale clubs 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 are a college student looking to build your credit history, this is a great card. You do not have to pay an annual fee, and your credit limit will increase after just five months of on-time payments. The card also has a decent reward structure and no foreign transaction fee, making this a solid choice. You could probably earn more rewards at Discover (with its good grade bonus) or at Citi (at least in the first year with its sign-on bonus), but any of these would be solid options so long as you keep your balance low and pay it in full and on time every month.
Yes, you will need to demonstrate that you have income in order to qualify for the credit card. The credit card company needs to know that you will be able to make the monthly payment.
No — there is not a limitation based upon which school you attend.
Yes — it is never a good idea to max out your credit card, even if the credit limit is very low. As a general rule, never use more than 10%-20% of the credit limit. You can make payments before the statement date to help keep your statement balance low.
You should work hard to make sure you make payments on time every month. A missed payment will lead to a late fee. It could also lead to interest accruing on the balance and ultimately a negative mark on your credit report.
When you graduate from college and get a job, you should (if you used your card wisely) have a good credit score. At that time, you will have plenty of options available to you.