Published in: Credit Cards | Nov. 15, 2018
How to Find a Credit Card for Students With No Income
By: The Ascent Staff
Students can be tough customers for credit card companies who aren't so eager to give credit cards to people who have no job and no credit. Getting your first credit card is a big step that can help students get started on the path of responsible credit use, which can help you get the lowest rates on mortgages or car loans later. Here are some of the best ways to get a credit card as a student with no income and no credit score.
Got $49? Try a secured card
The easiest way for any student to get a credit card is to open a secured credit card account in your own name. With a deposit as low as $49 (but no more than $200), you can open a secured credit card that will report to all major credit bureaus and offer a credit limit of at least $200.
The only difference between a secured card and an unsecured card is that secured cards require collateral. The bank will hold onto the deposit, which protects the bank against losses in the event that the balance isn't repaid. However, the deposit is not meant to be used to pay down the balance through the ordinary course of time.
You need to make payments on a secured card just like any other credit card. Failing to make payments on time will result in negative marks on your credit report. Collection agencies could also chase after you for any amount you owe in excess of your deposit amount.
What should you look for in a good secured card? No annual fees or maintenance fees is an important feature. Most secured cards have fees, and many offered by smaller issuers carry fees that can add up to $200 or more per year. Having looked through pages of fine print, we're happy to say we've found two cards on our list of the best secured credit cards that don't come with the typical account fees. They also report to all three major credit bureaus, helping students responsibly build credit for free as long as balances are always paid on time and in full.
Alternative methods for getting a credit card as a student
Applying for a secured credit card is the easiest way for a student to get a credit card, but it isn't the only way. There are two other ways for a student with no income to get your name on a credit card account, which allows you to have a credit card available for responsible use and to build credit over time.
Become an authorized user
Becoming an authorized user is a really easy way to get all the benefits of having a credit card, even if you can't qualify for a credit card on your own.
Authorized users are people who have the ability to charge purchases to a credit card account but do not have legal liability to pay the balance. Conveniently, when someone becomes an authorized user on an account, all of the history from that particular account usually finds its way into the authorized user's credit report.
Suppose a parent adds his or her child as an authorized user to a credit card account with 20 years of on-time payment history. Within a month or two, all of that history will start showing up on the student's credit report. It's very possible to go from no credit score to a very good credit score just by becoming an authorized user.
I can speak from experience. Years ago, after prodding my mother about this trick, she agreed to let me be an authorized user on one of her oldest credit cards. Just like that, I had years of good payment history to beef up my file. She's since closed the account, but thanks to that jump start, I was able to open my own accounts to build out my credit history.
Keep in mind that the authorized user will receive his or her own physical card that is tied to the main account holder's account. For obvious reasons, giving a student a credit card that they can use freely -- but have no responsibility to pay for -- can end up being a very costly problem for the main account holder.
Conversely, the problems of the main account holder can also become the problem of the authorized user. Missed payments or high balances will show up on the authorized user's reports, too. For this reason, it's imperative that the authorized user is added to an account with perfect history that will remain in perfect standing in the future, as well.
Not all card companies report authorized users to the credit bureaus. A good rule of thumb: If you've heard of the company before or have seen the card company's ads on TV, it probably does.
Sign up for a joint account
If you choose to employ this method, you'll want to do it quickly. The joint credit card is a dying breed, issued by only a handful of major banks. (There are more than 5,000 smaller commercial banks and about as many credit unions around the country, so there are probably a few joint card offers we're not aware of.)
A joint credit card account is pretty simple: Two people sign up to share one credit card account, sharing the privilege of charging purchases to the card, as well as the responsibility of paying off the balances.
A student can easily get approved for a joint credit card if the co-applicant has a high credit score and income. This can get pretty messy, though, since two people ultimately have the power to charge purchases to the card and also share in the responsibility of paying it back. Realistically, shared responsibility to repay balances only means so much. You probably shouldn't expect a student to come up with the cash to repay a balance given their limited budgets. Thus, it wouldn't be wise to apply jointly with a student who you wouldn't trust with access to your financial accounts.
The best way to get started as a student
All things considered, a secured card is probably the best bet because it offers the opportunity to start building credit without risking someone else's finances in the process.
Parents, grandparents, or others who want to help a student start on a solid financial footing might consider ponying up the deposit for a secured card in the student's name. Relative to adding them as an authorized user or signing with them for a joint credit card account, a secured credit card limits the financial risk to just the deposit (as little as $49 for one popular secured card) and the student's credit report.
It also ensures that all of the information about the account is reported to all three major credit bureaus, which isn't always guaranteed with authorized users.
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