In college, I vividly remember a young rep from American Express approaching me at the campus center to fill out an application for an American Express Green card. Not having a credit card at the time and relying on my Key Bank card and “money matic” machines for spending money, I happily obliged and submitted an application. Thirty years and many credit cards later, all of my Amex cards still bear the “member since 88” inscription.
Today, most parents ensure that their children have a credit card prior to leaving for school. However, since the age to get many cards is 18, most kids do not have a substantial credit history when they go to apply for a card. Denied applications are a strong possibility. This post will attempt to provide advice and tips to ensure your college bound students leave home with at least one credit card of their own (assuming they are 18 or over).
Let’s begin with some things you can do before your children are 18 to put them on the radar of the banks and credit bureaus.
Make your kids authorized users on some of your cards…
Having your kids as authorized users under your account can help build up their credit. I have been adding my kids as additional cardholders for quite some time. Each of my three kids has their own Chase Freedom Unlimited IN THEIR NAME, under my account. They know to use a credit card over cash when they are out and making their own spending decisions. I have trained them well. I also had gotten them their own American Express Hilton Honors card, as back in 2017 I got an offer where I was able to add additional card members to my account and earn 5,000 Hilton Honors Bonus Points per additional cardmember (up to 4). Those three new members (my kids) just needed to be 13 years old and needed to spend $500 in purchases on their new Card in their first 3 months of card membership. I made sure I did this on each card. My oldest, Daniel, also has a Chase IHG Rewards Club Premier Credit Card because I made him an authorized user when I got the card to score an extra 5,000 IHG Rewards points. Most recently, I added my kids as free authorized users on new my American Express Gold Card and this is proving to be quite lucrative as the kids often eat out without us and break out this card at restaurants. (4x Memberbship Rewards points per $1 at restaurants!)
Open bank accounts for your kids at a major bank (my choice would be Chase or Citibank)…
My kids currently have Chase bank accounts for minors, that Rob and I control. Once they are 18, we will convert these minor accounts to real accounts with the hope that those real bank accounts will be a positive factor used when evaluating their credit card applications. My ideal first cards for them would be the Chase Freedom Unlimited cards. The Freedom Unlimited card is a NO ANNUAL FEE credit card. You earn Cash Back Rewards with the card. The current sign-up bonus is to Earn $150 cash back or 15,000 Ultimate Rewards Points after you make $500 in purchases in your first 3 months from account opening. My virgin credit card kids do not need to worry about Chase restrictions on an additional sign-up bonus or the Chase 5/24 rule. With the card, you earn 1.5 points per dollar on EVERY PURCHASE. This means, you’ll earn 1.5% Cash Back rewards for each $1 spent. When you use points to redeem for cash, each point is worth $0.01 (one cent), which means that 100 points equals $1 in redemption value.
Once 18, your kids can apply for a student card on their own…
Approval odds are higher if your teens apply for a student credit card. Here is a sampling of a few offered by different banks-Discover Bank, Citibank and Capital One.
Discover offers the Discover it Student Cash Back Card, where you earn 5% cash back on rotating categories, and 1% cash back on other categories. After the first 12 consecutive billing periods that your new account is open, Discover will match all of the cash back rewards you’ve earned and apply them to your account. The card has NO ANNUAL FEE.
With the Discover it Student Chrome Cash Back Card, you earn 2% cash back at gas stations and restaurants on up to $1,000 in combined purchases each quarter, and 1% cash back on other categories. After the first 12 consecutive billing periods that your new account is open, Discover will match all of the cash back rewards you’ve earned and apply them to your account. The card has NO ANNUAL FEE.
With the Citi Rewards+ Student Card you earn 2% cash back at grocery stores and gas stations on up to $6,000 in combined purchases. You earn 1X ThankYou Points on other purchases. AND the card automatically rounds up to the nearest 10 points on every purchase. (A $2 coffee earns 10 points.) There is no cap on purchases that are rounded up. The card has NO ANNUAL FEE.
With the Citi ThankYou Preferred Card For College Students, you earn 2x ThankYou Points on Dining out and Entertainment (click here for a detailed definition of entertainment) and 1X ThankYou Points on other purchases. There is a 2,500 ThankYou point bonus after you spend $500 in the first 3 months of account opening. The card has NO ANNUAL FEE. Update: Currently, the Citi ThankYou Preferred Card for College Students has been discontinued for new applicants.
With the Capital One Journey Student Card, you earn CASH BACK with the card. You will earn 1% cash back on your purchases. In addition, if you pay on time, you will be awarded an extra 0.25% (for a total of 1.25%) cash back earned in each billing cycle if your account is not past due on the last day of the billing cycle. Once you qualify for the additional cash back, Cap One will apply it to your rewards balance within two billing cycles. The card has NO ANNUAL FEE.
In the event that your child cannot get approved for a student card, they can opt to apply for a secured credit card. Secured credit cards can help a student build up their credit history. Secured cards are perfect for those who have never established credit (or have poor credit) and who want a credit card. After your child demonstrates good behavior with their secured cards, they can work their way up to an unsecured one.
A secured card is a card that requires you to make a cash collateral deposit that becomes the credit line for that account. The bank holds this security deposit just in case you don’t pay your bill. You can charge up to the amount of that deposit. Cards usually require a deposit amount from about $300-$500.
Despite the fact that you need to put down a deposit, you are building up your credit history as you use the card and pay it off. You can usually qualify for an unsecured card (with good behavior) after about a year.
Many banks offer secured credit cards. Here are some that are available…
The Citi Secured Credit Card has no annual fee. To get approved for this card, you must meet Citi’s credit qualification criteria, which includes a review of your income and your debt. In addition, to be approved, you must not have any bankruptcy history within the last two years.
If you are approved for the card, you provide a security deposit for the amount of your credit limit, between $200-$2,500. Your security deposit must be equal to the amount of your credit limit. Your security deposit will be held in a Collateral Holding Account for an initial term of up to 18 months and will not earn interest. Unless Citi determines your account is eligible to have your deposit returned, you must keep your CHA open for the full 18 months. Note, if you are in default, you risk losing your security deposit in the amount of the outstanding credit card balance and having your account closed.
The Discover it Secured Credit Card has no annual fee. The card requires a refundable security deposit up to the amount you are approved for of at least $200 which will establish your credit line. You will need to provide your bank information when submitting your security deposit. Discover will automatically begin reviewing your account starting at 8 months to see if you can be transitioned to an unsecured line of credit.With this card, there are spending bonuses too. You earn cash back on every purchase. You earn 2% cash back at gas stations and restaurants on up to $1,000 in combined purchases each quarter, automatically. Plus, you earn unlimited 1% cash back on all other purchases.
Currently there is an INTRO OFFER where Discover will match ALL the cash back you’ve earned at the end of your first year, automatically.
The Capital One Secured Mastercard has no annual fee. The required refundable security deposit is $49, $99 or $200 and is based on your creditworthiness. Your initial credit line will be $200 as long as you make the minimum required security deposit. Also you can deposit more money before your account opens to get a higher credit line. You will gain access to a higher credit line after making your first 5 monthly payments on time.