Key takeaways
- Student credit cards are unsecured credit cards that can help college students build credit, sometimes while earning rewards.
- Secured credit cards require a refundable cash deposit as collateral, but they are also a great tool that cardholders can use to build credit with responsible use.
- Student credit cards are geared to adults with limited credit history or no credit at all. In contrast, secured credit cards can work for students with limited credit or people (even non-students) with bad credit.
If you’re trying to decide between a student credit card versus a secured credit card, you should know these two types of credit cards are similar but not the same. Where student credit cards are usually unsecured cards that don’t require a cash deposit as collateral, secured credit cards require a minimum deposit (usually $49 to $200) to establish your line of credit with the card.
Secured credit cards come with one benefit that makes them a better choice for a variety of people: They are the easiest to get approved for among all types of credit cards available today. Here are the pros and cons of secured and student credit cards — this way, you can decide which one is best for you.
When to choose a student card
Student credit cards are for students who want to begin building credit for the future. Students tend to get approved with minimal credit history and some issuers even approve applicants who don’t even have a credit score yet.
Because student credit cards are geared toward people who haven’t built their credit history yet, they tend to come with low limits and few benefits. However, many student credit cards charge no annual fee and offer rewards for spending, as well as free credit score tracking and other credit-related tools.
Pros of student cards
- Get approved with limited or no credit. It’s possible to get approved for a student credit card when you have no credit history at all, provided you meet other requirements that vary depending on the card issuer.
- Build valuable credit history. Student credit cards report your payments and balances to the three credit bureaus, therefore, they help you build credit you’ll need later in life.
- Earn rewards for spending. Many student credit cards offer cash back or other types of rewards for each dollar you spend, which is a major advantage for young people who are strapped for cash.
Cons of student cards
- Proof of student status may be required, so these cards aren’t available to everyone trying to build credit.
- Getting approved with bad credit may be difficult. While student cards promote easy approvals for limited credit, getting approved with a low credit score or negative information on your credit reports may not be that easy.
- Rewards and perks are limited. Student credit cards tend to come with low limits and the rewards and perks may not be that great.
When to choose a secured card
While student credit cards are for students who want to build credit, secured cards can be for students or anyone else who wants help building or repairing credit. Secured credit cards are easy to get approved for so they are often marketed to people with low credit scores or bad credit due to past mistakes.
Secured credit cards require a cash deposit to get started, but the deposit is refundable when the account is closed in good standing or upgraded to an unsecured account. Secured credit card issuers usually report card activity to the credit bureaus, which means cardholders can build credit with responsible use. Some secured cards also offer rewards and charge no annual fee.
Pros of secured cards
- You don’t have to be a student to apply. Anyone can apply for a secured credit card, whether they’re a college student or not.
- Build credit with responsible use. These cards report to the three credit bureaus, which can help build credit for the future.
- Earn rewards for spending. Many of the best secured credit cards earn cash back for each dollar spent.
Cons of secured cards
- Collateral requirement. You’ll have to put down a cash deposit to begin building credit with one of these cards.
- Rewards and perks are limited. Rewards and cardholder benefits are fairly limited among secured credit cards.
- Potential for very low starting credit limit. Your security deposit typically equals your credit limit, so putting down $200 in collateral can mean having a credit limit of just $200 on your card.
Alternative ways to build credit
If the decision between a secured card and a student card has been difficult to make and you want to consider more options, here are a few alternative ways to build credit.
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Becoming an authorized user on a trusted friend or family member’s account can also help you build credit.
If they add you to their card as an authorized user, you essentially get the chance to “piggyback” off their monthly payments to add depth to your own credit reports. But it works both ways — if they use the card irresponsibly, it can damage your credit. Make sure the primary cardholder who agrees to add you has a good credit score and a long history of responsible use.
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Credit-builder loans have you make monthly payments to a savings account or certificate of deposit (CD) in your name, and the loan issuer reports the payments to the credit bureaus. In the end, you get the money you paid toward the loan back, minus a nominal amount of interest and fees.
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Several credit-building apps can also give you a leg up when it comes to improving your credit and often for free. As an example, Experian Boost reports payments like subscription services, rent and utility bills on your Experian credit report, which means responsible payments of these bills can help you build credit.
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You can also look at other starter credit cards that are unsecured but not necessarily geared to students. Starter cards offer similar credit-building opportunities as student and secured cards and tend to feature basic perks along with low initial credit limits.
Examples of starter credit cards include the Capital One QuicksilverOne Cash Rewards Credit Card and the Petal® 1 “No Annual Fee” Visa® Credit Card*.
The bottom line
If you’re debating between student credit cards and secured credit cards, you should know that either option can help you build credit. Both types of cards are meant to help you improve your credit score with responsible use, as well as learn positive habits so you can move on to cards with better perks and rewards.
The key to using secured credit cards or student cards to your advantage is keeping debt low and always paying the monthly balance on time and, if possible, in full. Do these things and you’ll be on your way to improving your credit.
*The information about the Petal® 1 “No Annual Fee” Visa® Credit Card has been collected independently by Bankrate. The card details have not been reviewed or approved by the card issuer.
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