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Best Cashback Credit Cards For Students

by on April 24, 2012 · 30 comments

in Cash Back Rewards, Credit Cards, TPG Contributors

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Best Cashback Credit Cards For Students

Graduation season will be here soon, and a lot of TPG readers are young people just getting started with credit, so I thought I’d have a TPG contributor named Mark, himself a recent college grad, write about the best cashback cards for college students looking to build their credit. As you’ll see, there are plenty out there with a lot of great features for credit newbies.

Back in 2007 when I was still in high school, I saw a powerful documentary called “Maxed Out” about the dangers of easy credit. I think it should be required viewing for any young person starting out with credit, and though it was meant to scare us about the dangers of playing fast and loose with your credit, I viewed it as a practical learning tool.

Here are a couple of other things I learned as I was building up my own credit as a college student, as well as a few of the best cards out there for young people to start with.

Cosigners
One easy way for students to build their credit responsibly is for their parents to cosign on a card with their children.  This strategy is great for many reasons.  For one, that card could be a miles-earning card and get you that much closer to a great spring break trip.  Secondly, the parents on the card can put a spending limit on it so their kids don’t (in fact, they can’t) go wild at the mall.  Building credit this way worked for me, as it taught me how to spend responsibly in a safe way.

Some parents might not want to run the risk of damaging their good credit scores if their children make a few mistakes (who can blame them?). So I’ve picked out four good cards are catered to young people. Now, neither of these earns miles or points, but they are cashback cards. Sure, you might not get those sexy trip awards, but think about this as a sensible first step in building to those better cards. When banks see you can handle a lower limit card, when you do decide to apply for a points-earning credit card, you can get a great one that will send you around the world and back!

Student Credit Cards

1.  Citi® Dividend® Card for College Students:
This card is a great start for students.  It is specifically designed for them to build credit up for themselves in a responsible way.
Pros
-Enroll to earn 5% cash back in must-have categories up to $300 per calendar year.
-Earn a full 1% cash back on all other purchases
-Free enrollment each quarter for new categories that earn additional cash back.
-Manage your account online, on your tablet or on your Smartphone
-No Annual Fee and no co-signor required

Cons
-APR ranges from 13.99%-23.99% (Variable).

2. Discover It®
College students will love this card’s generous cashback terms and friendly customer service from Discover.
Pros
-0% APR for 14 months, which again is great for larger purchase you know you can pay off.
-5% cashback rotating calendar.  This is great because the categories rotate quarterly. For this past year, January to March was gas and entertainment, April-June is restaurants and movies, May is restaurants, July-September is gas and “summer fun” (movies and theme parks), and October-December is Holiday shopping.
-Up to 20% cash-back through the Discover shopping mall, with retailers like Best Buy, Nordstrom, and Apple.
-Great student-friendly customer service including raising limits or dealing with bill-related issues.

Cons
-No points earned on purchases, but with the generous cash-back you may not miss them.
-Up to 22.99% APR at the end of the 14-month trial period, which won’t matter if you are a good spender and don’t go over your budget.

3. Journey Student Rewards Card by Capital One
Check out this card if you know you can spend within your limits and not have a balance at the end of each month.
Pros
-1% cashback on every purchase, which takes the guesswork out of what you can earn back on your card.  While it’s not high, it is something!
-No Annual Fee
-25% additional cashback on all cashback you receive if you pay your bill on time.  If you spend $400 a month, you’ll be earning back an extra dollar!  This is great because it’s a positive reinforcement for paying your bills on time.

Cons
-No miles earned on the card
-High 19.8% APR no matter what, so no grace period like the above cards.

For those who don’t want a credit card, but want to learn using money responsibly, American Express offers the Pass Card which is a prepaid spending card parents can reload with their child’s allowances each month, and is designed for teenagers.  No credit is earned, but it teaches younger children about credit and how to spend wisely.
Pros
-Teaches valuable spending lessons to a younger population, which will make them more responsible spenders in the future
-Preloaded with money deposited by parents, so no overdraft fees associated with ATM cards
-Accepted everywhere American Express is accepted.

Cons
-No credit earned. The point of the card is to teach about spending within a set limit, not about credit.
-$2 ATM fee after the first withdrawal each month, which is not free like most ATM cards from the major banks.
-Must reload card if more money is needed.

Like I said, these aren’t the lucrative points-earning cards that TPG normally covers, but they are some of the best options out there for college students just starting out to begin building their credit while still earning some valuable cashback before transitioning into points-earning cards.

Disclaimer: The responses below are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser's responsibility to ensure all posts and/or questions are answered.

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  • http://twitter.com/asreese Aaron Reese

    Good that you mention that it’s a good idea to get a no annual fee card – these are especially important for people just starting out with credit because it makes it easier to help the length of opened accounts by keeping it open indefinitely (without paying yearly for the privilege!)

    (thanks for the writeup, too! good to see some easier cards on the list. many friends ask me about this same question, but they usually have terrible credit and want to jump straight to a miles card)

    Other good cards for “basics”, although not strictly for students, are the Chase Freedom, the Citi Forward, and possibly the Amex Blue Cash for their higher category cash/point back bonuses. Amex may have tightened its offerings to students, but a blue cash was my first card in college and it’s been great to have as a long-open account.

    I also worry about encouraging students on the one hand to be super responsible, then on the other hand telling them about 0% APR offers. I would be highly, highly wary of encouraging first time credit users to take advantage of these offers. They usually come with fine print that if you don’t finish paying off the full balance in the term offered, 9 months or whatever, you are charged interest and penalties retroactively through the life of the card. Very very dangerous and exactly the trap credit companies want you to fall in by making these offers.

  • AspiringPointsMan

    Brian, I am a student who will turn 18 soon. I have the BOA Us Air Debit Card, but its lousy with 3,000 signing bonus and 1 mile per 2 dollars spent. Why can’t the Banks make a student rewards cards?

  • thepointsguy

    I think most students are fine with “cash back” since its more easy to understand. Just note- just because you are a college students (to be) doesn’t mean you have to have one of these cards. If your credit is good enough, you can get a regular rewards card-just be careful of annual fees and not running up a balance.

  • Ted F

    - Citi Forward (5% eating out, movies, and AMAZON!) should be number 1 on that list.
    - Chase Freedom (5% rotating categories) should be second (though Discover More might seem to be better on surface due to its gift card redemption) for its Ultimate Rewards program which is great prep work for Sapphire Preferred in the future.
    - Amex Blue Cash (3% groceries, 2% gas and department stores) should be third as the new version no longer has the minimum annual spend threshold.

    All 3 have no annual fees, all 3 are student-friendly in terms of approval. I have pushed all my friends to get all 3 to START RELATIONSHIP WITH EACH MAJOR ISSUER! APRs should not even be a factor as even as students, they should be spending what they can pay off each month!

    Do you guys only recommend cards that give you referral credits??

  • thepointsguy

    I have referrals for those three cards, so to answer your question- no.

    This was a guest post from a current college student. I’m sure there are plenty of other cards that could be added to the list, but he focused on the pros and cons of the top cards that are directly marketed towards college students.

    Good tips on those three cards, though!

  • Mom

    Thanks for this post. As the mom of a soon to be college student, we’ve been discussing the credit card matter. Definitely want the student to have their own card with just their expenses on it.

  • AspiringPointsMan

    Ok thanks Brian. I appreciate the response.

  • Caleb B

    Brian,
    I have read before that the cash back earned on an AmEx Blue card can be converted to Membership Rewards points, is this true? (can this only be done if one gets a Membership Rewards point-earning card and asks for the conversion?) If so, I would say that the Chase Freedom and AmEx Blue cards would be a great combo to start out.

  • Chapman U Student

    very helpful article

  • Poor College Chap

    This is the tastiest article on cashback credits I have ever read. It’s all so confusing and I feel like I never have the time to listen to any of it. This really broke it down for me.

  • college kid

    great stuff and very informative, would like to see more from Mark

  • guest2343

    Awesome, I’ll have to look into these credit cards.

  • Jimgotkp

    I’m currently 21 but got my first CC the day I turned 18 since my dad wanted to make sure I would have a credit history and score at an early age. It was a lame BoA Platinum Plus Visa which had no rewards and I didn’t use it much. However, once I got into this whole CC thing I started to apply for cards at the age of 20 and thankfully my score was high since I had a two year history and my dad made sure my finances were in order which helped my score.

    Great article by TPG!

  • Poya O

    One of the best articles I have ever read. Really helped

  • Hunter

    Wow this is very helpful.

  • Cefseaff

    Great article! I never knew about half the things on here

  • http://twitter.com/TheRyanRobinson Ryan Robinson

    Love it! There’s no reason that even college students can’t be getting rewarded for the money they spend. Lifetime clients are worth a TON!

  • Austin DeVone

    this was extremely helpful mark!! thank you!

  • Ben Skip Smith

    Great article super useful!

  • Dario

    As someone who knows nothing about credit benefit options, this was actually really helpful. This will definitely help me get started.

  • Chuck Goff

    Great Article.

    I think college students forget the importance of a strong credit score. As long as they remember to pay their bill on time, there is no reason why they should not have a credit card. This article does an awesome job at laying down a foundation for college students to get started with a credit card.

  • Keithmichaelwong

    Very helpful! Most college students don’t realize that they need to be building their credit already.

  • http://www.facebook.com/profile.php?id=670338473 Sean Reeder

    Im a college student with the AAdvantage Visa Platinum Select to my name.

    Go big or go home. Used the miles to get into CX F

  • Forrest

    Good info for anybody in college and looking to manage their money well!

  • PJ

    dont count out Discover card 5 % on quarterly rotated catogories; it is trumping my Sapphire Preferred in Argentina and Brazil :) – I am getting 5% OFF on dining no Foreign currency fees

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  • Heeb

    Just graduated advice?

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