Credit Card for College Freshman

seniormom43 · 03-26-2005, 07:39 AM

My 18 year old D is a college Freshman and asked our thoughts about applying for a credit card to build credit, and to have on hand in case of emergencies. We agreed that it was a good idea. Please note, we know our daughter and how meticulous she is with her finances, so we do not see this as a risk .

So, she went to the bank where she has her checking account (NBNA) and applied for a no fee Student Visa card, whose key benefit is advertised as 'To begin building your credit history.' Her application was rejected because the credit card company says that they contacted Equifax, and that she doesnt have enough credit references. They are correct there, as she has no credit references since she is just appliying for credit for the first time in her life. But, isn't that the purpose of the credit card she applied for?? To build credit? When challenged, the bank recommended a secured credit card (with a fee of course).

Has anyone else's student ever had difficulty like this in obtaining a student credit card to build credit, and then be denied because of no credit? Could it be because she doesnt have a student loan? Any suggestions as to how to circumvent this?

Thanks

achat · 03-26-2005, 07:45 AM

My husband called Visa and had a joint card issued with my son. I don't know if it is a student card. We did not go the way of getting a separate card for my son...it probably would have resulted in the same outcome.

jym626 · 03-26-2005, 08:22 AM

Thake a look at this thread from February Credit Card vs Debit Card
If your d. cant show any credit, can she show assets (ie checking or savings accounts)? Sometimes the bank you bank with, if you are a good, established customer, will give your child a credit card with a small credit limit so they can establish their relationship with her.

As Achat said, you can also cosign on a credit card. It will still be in your d's name primarily. You'll just be on the hook if she goes hog wild

And not to fear- she'll be deluged with creditcard opportunities on campus when she gets to college. I don't recommend this as the best way to go, if she can help it. Better to shop around for the best deal in advance. But if all else fails, she will definitely be able to get one at school-- just watch for hidden junk fees, high interest rates and such.

mishdoob1 · 03-26-2005, 09:26 AM

How about the visabuxx card - not exactly the same as a usual credit card, since you have to "preload" specific amounts of money on it, but it works.

sillystring7 · 03-26-2005, 09:26 AM

Last year, a lot of new freshman who posted on CC received credit card applications in the mail, but were then turned down because they had no credit history (I think Citibank was a prime offender). We are members of USAA, which serves families of past and present military personnel. USAA offers a student card that is automatically approved for members' children, regardless of whether they have a job or a credit history. It offers a $500 limit for freshmen, going up automatically in increments each year as creditworthiness and responsibility are established. An auxiliary card on a parents' account does not establish a students' creditworthiness. To accomplish that, the student must be the primary account holder.

simba · 03-26-2005, 10:10 AM

You may want to try 1st FinancialBank USA. We got a flier in mail. They can start you out with credit limit of $150. A word of caustion though. The reviews on this card are mixed. They are very unforgiving. They make their money on over the credit limit, late payments and very high interest rate (you do have grace period and no yearly cost).

newmassdad · 03-26-2005, 10:22 AM

simba raises an interesting issue.

These days, one needs to shop for a card very carefully. Between short grace periods, punitive late fees, high interest rates for even one late payment, etc., many cards have real traps.

I don't know that a freshman needs to worry about building a credit history. Heck, I'm not so sure a senior needs to worry about it too much, given all the new grad programs etc., not to mention the ever present option of a parental co-signer. Besides, building a credit history is only a good thing if it is a GOOD credit history. Do you want to gamble that a kid starting out college has the discipline to get those bills payed on time AND get good grades AND have fun AND...? Just remember, each late payment (only one day, with a short grace period) will be reported by these cards.

Emergencies? Different story. I had my D issued a card on my main account. I trust her enough to tell me right away if she loses the card and not make charges without permission.

editrix · 03-26-2005, 11:11 AM

I'm inclined to agree with Newmassdad: I don't think your daughter will find it hard to establish credit later on, and I believe student credit cards can hurt more than they help. Many of these cards come with disadvantageous--and confusing--payment terms and interest rates, and can lead to real trouble, from major debt to a lousy credit rating because of a few late payments. There have been many articles warning about the dangers of these cards; here's a link to one that seems pretty sensible: http://www.youngmoney.com/credit_deb...debt/020809_01.

Assuming that your daughter has a savings or checking account, many banks (my freshman daughter uses Bank of America) now have ATM cards that also function as Visa or Mastercard debit cards that can be used at stores and for online purchases. Like Newmassdad, I also got my daughter her own credit card on my account, to be used for emergencies and pre-approved expenses like school books and eyeglasses. She knows that I watch her bills on that account and has been extremely responsible with the card. (Even her younger sister, who was at first jealous at the idea that the older one got a credit card of her own, has seen me checking the bills and is getting the idea that a credit card isn't free money.)

I'm not sure whether her debit and/or my credit account will help my daughter start building a credit history, but again, I don't think that will be a problem once she has a genuine source of income.

simba · 03-26-2005, 11:12 AM

newmassdad, I agree with you about 18 year olds building a credit history (a joke in my mind). But the way I see it, this may teach kids to be responsible. With a small credit limit, the down side is not high and they would learn their lesson. Besides my son is dying to have his 'own' checking account and credit card - he is in hurry to be an adult.

thumper1 · 03-26-2005, 11:49 AM

Bank of America has a student plan. It includes free checking, an ATM card and a Visa Card (in the student's name only). Check there.

Maize&Blue · 03-26-2005, 12:31 PM

Investigate the institutions that are located at/near your D's school. Free accounts are plentiful and they cater to students' needs (low credit limits!).

Wells Fargo has a student plan - free checking, savings, debit card, and VISA. Need to be 18. D had absolutely no problem establishing this account in our hometown. Her OOS college town has a branch and an ATM in the school's student center.

6 years ago, S opened a similar comprehensive student account at National City Bank during summer orientation at UMich (not a bank in our state). Not one eyebrow was raised about lack of credit. He's in grad school now in another state and still uses their VISA card.

ariesathena · 03-26-2005, 12:43 PM

I had the same problem - literally no credit (not bad credit, just no credit), so I couldn't get a card.

CapitalOne does student credit cards. They have a $500 limit, which is enough for most things but low enough so that the student isn't going to get into trouble with it. capitalone.com, I think... no fee, Visa, no finance charges if paid off in full every month.

1moremom · 03-26-2005, 01:04 PM

I have been tossing S's (many) credit card offers into a file and plan to sit down and compare them all. One that looks interesting is the Vision Visa from 1st Nat'l Bank of Omaha. It has a credit limit of $500 or $1000 and will not be reviewed for a credit line increase for 2 years, no fee, some small amount of cash back and a 10% discount from many bookstores and www.gotused.com. (until 12/31/05). It does require a co-signer.

jym626 · 03-26-2005, 01:49 PM

I accidentally posted my response to this thread in the "credit vs debit card" thread on the parents cafe. In that, I gave the link to bankrate.com's comparison of many student credit card deals. This should be the link http://www.bankrate.com/brm/search/tellthem.asp
That thread addressed many of thes issues being discussed here.

jmmom · 03-26-2005, 03:20 PM

I read on this board, with some surprise, that if your S/d has a card in his/her name as an authorized user on your account, this will begin to build a good credit rating for the kid. I then went to a credit rating site (a free one, not paying Equifac, Hyp,...) and found that my S does indeed have an excellent credit score. He has had a Visa w his name on it since early teens and he just got an AX w his name on it when he turned 18.

This seems to me to be an outstanding way to start to build credit history (assuming you have a responsible teen who will not charge you into oblivion; our S reimburses us for any "discretionary" purchases he makes). We did not get him the cards for this reason, as we had no idea it would work that way.

Given this, we are in no rush for him to need his own account when leaving in the fall. If it becomes too much hassle to sort his purchases from ours in terms of who will pay, then we will go that route and presumably benefit from the fact that he has credit "established."