Should You Get a Student or Secured Credit Card?
If you’re new to credit, should your first card be a student card or secured card? Both allow you to start building credit from scratch. But there are some key differences to weigh.
In this comprehensive guide, we’ll compare student and secured credit cards side-by-side across approval requirements, costs, rewards potential and other factors. Read on to determine the better match for your financial situation.
What Are Student Credit Cards?
Student credit cards are designed for those in college with limited credit history. They offer:
- Low credit limits from $300 to $1,000 based on income
- Opportunity to build history through responsible usage
- Potential rewards like cashback, points or miles
- 0% introductory APRs on purchases for 6-12 months
- Reporting to all three credit bureaus
- Added benefits and protections specifically for students
Now let’s explore secured cards.
What Are Secured Credit Cards?
Secured cards require an upfront security deposit that becomes your credit limit. They offer:
- Credit limits matching refundable deposit, typically $200 to $500
- Deposit held as collateral in savings account
- Way to build/rebuild credit through on-time payments
- Possibility to graduate to unsecured card and get deposit back over time
- Often, but not always, charge annual fees around $29-$49
Next let’s compare some key differences between the two starter card types.
Comparing Credit Requirements
Student cards generally have requirements including:
- Active enrollment at a college – Often 2-year or 4-year
- Minimum GPA – Typically 2.0 or higher
- Sufficient income – Grants, financial aid, part-time work
- FICO scores between 650-700+ in most cases
- Cannot be authorized user – Must apply solo
Whereas secured cards are accessible as a rebuild option even with:
- No credit or very poor credit
- Past bankruptcies or accounts in collections
- No proof of income required in many cases
- No college enrollment verification
- FICO scores below 550 accepted
Secured cards are an option when poor history disqualifies approval for student cards.
Evaluating Cost Differences
Typical costs for student and secured cards include:
Student Card Costs
- No annual fee in most cases
- Late payment fees if applicable – Up to $40
- Cash advance fees – Around 5% of amount withdrawn
- Balance transfer fees – 0-5% of the transferred amount
Secured Card Costs
- Annual fees commonly $29 – $49
- Application fees – Around $50 initially
- Late fees similar to student cards
- Cash advance fees similar to student cards
Secured cards have more fees, but help those rebuilding or establishing from scratch.
Comparing Credit Limits
Student card limits often range from:
- $300 – $500 with no prior history
- $1,000 – $2,000 with a short credit history
- $3,000+ only after establishing responsible usage
With secured cards, your limit equals:
- The refundable deposit made upfront, often $200 – $500
- No preset spending maximums
- Deposit determines how high of a limit you can access
- Requires deposit funds upfront before making purchases
Secured cards allow control over your exact starting limit based on available savings.
Reviewing Impact on Credit Scores
Both student and secured cards influence scores similarly when used prudently.
Adding accounts helps credit through:
- Increased total available credit and number of accounts
- Balances and payments reporting to all three credit bureaus
- Establishing length of history and mix of accounts
- Demonstrating responsible usage and payment patterns
The biggest boost comes from diligently avoiding missed payments over an extended timeframe.
Comparing Rewards Potential
Student cards tend to offer:
- Cashback rewards around 1% – 5% back in rotating categories
- Points or miles rewards – typically 1X – 3X points per $1
- signup bonuses between $50 – $150 in value
While secured cards have historically offered no rewards, but newer ones provide:
- Cashback around 1% – 2% back in select categories
- signup bonuses worth $50 – $100 in value
- Rewards can’t be redeemed until after graduating to unsecured
Secured card rewards remain limited currently but improving.
Weighing Pros and Cons
Pros of student cards include:
- No large deposit is required upfront
- Proof of college enrollment helps approval odds
- Higher initial spending limits in many cases
- Often no annual fee
Pros of secured cards include:
- Nearly guaranteed approval regardless of credit score or history
- Opportunity to build credit even with prior issues
- Deposit recouped eventually and usable for other savings goals later
- Unsecured card pathway over time by graduating
Both provide pros of building credit safely with responsible use. Evaluate which set of pros fits your current financial situation.
Who Does Each Card Benefit Most?
Student cards best fit those who:
- Are currently enrolled in college
- Have limited income but some credit history
- Want rewards that offset spending
- Only need a small starting credit line
Whereas secured cards help those who:
- Have poor credit or no prior credit history
- Are denied for other unsecured cards like student cards
- Don’t mind tying up refundable deposit money to hold as collateral
- Need to restore credit after prior missed payments or other issues
Tips for Choosing Your Best Starter Card
Consider this guidance when deciding on student vs secured card:
- Weigh your current credit standing and approval odds for each card type
- Compare costs like annual, monthly, or overlimit fees
- Review rewards rates and signup bonus offers
- Make sure your income meets issuers’ requirements
- Check needed documentation like proof of college enrollment
- Consider familiarity and relationships with current banks
You can’t go wrong building credit safely with either card. Opt for the one fitting your current profile and habits best.
Can You Graduate from Secured to Student Card?
Yes! With diligent account management, after 12-24 months of on-time payments, secured card issuers may graduate you to an unsecured student or rewards card.
You’ll get your security deposit back, and can then qualify for a new card. Take the pathway that suits your situation. Building credit systematically over time remains the key.
Closing Thoughts on Choosing Your Starter Card
Both secured and student credit cards offer responsible ways to establish or rebuild credit, accrue rewards, and practice money management skills early on.
For those denied other unsecured cards, secured cards provide an accessible alternative to still demonstrate diligence. Those in college may find student cards provide lower limits and costs.
Whichever route you choose, maintain sound habits month-to-month. This opens doors to prime rate loans, apartment rentals, premium travel rewards, and other financial opportunities down the road.