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Calling all students: 5 smart reasons to get a secured credit card
Consider a secured card if you've been denied a student credit card.
College is a great opportunity to start building your credit since your financial responsibilities are typically low. However, you might not necessarily qualify for a student credit card depending on you or your parents’ past credit history.
If this is the case, consider starting out with a secured credit card. This type of card is easy to obtain for someone with no credit history and it can offer multiple benefits that are perfect for college students. Use it wisely, and you’re well on your way to long-term creditworthiness.
Quick look at the benefits of a secured credit card for students
What are the benefits of a secured credit card for students?
1. Start building a credit history before you need it.
A solid credit history is essential to many purchases you’ll need to make in the future. Having a decent credit score right out of school will prepare you ahead of time for events that rely on your credit score.
- Employers might check your credit.
HR is more likely to hire you if you have good credit, which implies that you’re responsible. - Get better rates on car loans.
Most of the time, good interest rates go to those with good credit scores. - Tilt the odds in your favor when renting.
Credit often plays a role when you’re looking for housing. If your credit score is too low, a landlord might decline your application. - Sail through a credit card application.
You may need a credit card as you start making purchases on your own. Card providers prioritize customers with great credit.
Rather than building credit when you need it, start the process early. Pick a secured card that reports to the three major credit bureaus, then let time work its magic.
2. You don’t need a credit score to apply.
Secured cards are invaluable for new cardholders as you don’t need a credit history to apply. Because you put down a deposit to secure these cards, you’re considered less risky to a provider that can simply take your deposit if you fail to make payments. And you can apply with a good chance of getting approved.
Some of the best credit cards for college students often include secured credit cards because approval rates are high on these cards. Secured credit cards for families with no credit or poor credit are great for building up good credit with minimal risk compared to unsecured cards.
With that said, it’s important to note that standard student credit cards often allow for a parent to cosign your application. These cards generally have better terms and rewards than secured credit cards, without requiring you to personally have a credit score provided your parents have a good credit history. Make sure to compare your student credit card options first before applying for a secured credit card.
Students under the age of 18 can also apply for a secured credit card. To get a secured credit card under the minimum age of 18, you’ll need a cosigner, who puts their name behind your spending habits and promises to be responsible for you. This provides another level of protection for college students who are still learning how to properly manage their credit.
3. You can practice using credit responsibly.
When you have a high credit limit, it’s tempting to use your card for large purchases and put repayment on the back burner. But this is an easy way to spiral into a huge debt that can take years to erase. Secured credit cards help college students learn good spending habits.
With a secured card, your credit limit is the amount of money you deposit up front. This might sound like a disadvantage, but it can benefit those who are new to credit cards. If you put down a $200 deposit, you effectively ensure that you can’t spend more than that. You’ll need to consistently pay off what you owe first before spending more with your card.
This is one of the benefits of a secured credit card over a student credit card. Student credit cards can come with much higher credit limits depending on the card and your credit history. If you’re someone inexperienced with proper credit card usage, this higher limit can prove more troublesome than helpful.
Operating within a small credit limit offers plenty of practice with handling credit. You’ll come to view your card as a tool to easily make small purchases, instead of a gold mine of untapped riches. Better yet, you can correct bad spending habits — such as spending too close to your credit limit — before you’re eligible to open new credit cards in a few years.
4. You can graduate to an unsecured credit card.
An attractive benefit of secured cards is that some allow you to graduate to an unsecured card. Unsecured cards are what we typically think of as “normal” credit cards and they don’t require security deposits.
If you can’t get a student credit card at first, consider starting with a secured card that gives back as you prove you have responsible borrowing habits. For example, the Capital One® Secured Mastercard® gives you a higher credit line after you pay on time for the first five months.
5. Whet your appetite for an unsecured card.
Secured credit cards can be helpful but an unsecured card can offer greater benefits at lower fees. All of the best cards — cash back, travel, balance transfer, 0% intro APR and more — are unsecured. And the best perks are reserved for those with good credit scores. The same goes for secured credit cards — the best secured credit cards for college students looking for perks might require a better credit score.
While your secured credit card won’t offer many perks, you can start thinking about what you value most in a card. This will inform your research when you start looking for an unsecured card down the line.
By spending responsibly and paying off your balance in full each month, you’ll soon be able to open a card that comes with travel benefits, spending bonuses and other perks to reward your spending habits. To make sure you’re getting the best card for you, compare all of your options for a secured credit card.
Compare secured credit cards
Bottom line
If you’re unable to qualify for a student credit card, but still want to start building your credit, a secured credit card can offer all of the same credit-building capabilities, albeit with fewer features. Compare student credit cards to see if there’s a card that suits your needs and then check out available secured credit cards to find out which option is best for you.
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