Getting your first credit card as a college student may not be easy. In fact, because students often have a limited credit history, the cards aimed at them aren’t usually the best when it comes to rewards. However the Discover student cards are different. Here are three reasons why…
Reason #1: Way better rewards
There are two Discover cards designed for students: Discover it for Students and Discover it chrome for students. Here’s what the Discover it® for Students is giving for rewards…
- 5 percent cash back in categories. You get new categories every quarter that you can sign up for.
- 1 percent on everything else. You will always get at least 1 percent on everything else you buy.
As for the Discover it® chrome for Students, it’s offering:
- A permanent 2 percent cash back on up to $1,000 in spending each quarter on combined gas station and restaurant purchases
- 1 percent cash back on all other purchases
Reason #2: More benefits than most student cards
Both Discover student cards offer the following
- Purchase Protection. In my opinion this is one of the most useful credit card benefits. With it, the eligible purchases made with your Discover card are protected for the first 90 days against theft or accidental damage, up to $500 in coverage per purchase.
- Extended Product Warranty. On eligible purchases, Discover gives you an additional year of coverage on your existing warranty of 36 months or less. So let’s say you buy something, like a brand new iPad from the Apple store, that comes only with a one-year manufacturer’s warranty. In addition to that, you will have one year extra through Discover for no additional cost.
- Return Protection. Ever try to return something but the store won’t take it back because more than 30 days have gone by since the purchase? The nice thing about this benefit is that you can return any qualifying purchase to Discover within 90 days for up to a $500 refund, even if the store won’t take it back. Keep in mind though that just like any return, you have to give back the item in like-new condition.
- $0 Fraud Liability Guarantee. Don’t worry about getting scammed, because if your card or account number is ever used fraudulently, you won’t be responsible for those charges.
Reason #3: The fees are fair
- No annual fee. Yep that’s right, you get all the above benefits for no additional cost.
- No over-limit fee. You won’t get charged a fee if you go over your credit limit.
- No foreign transaction fees. Many credit cards will charge you up to 3 percent extra when making purchases outside the U.S. That goes for purchases made when you are physically outside the U.S., but sometimes also for purchases you make online from overseas merchants. With Discover, however, you can use your card anywhere in the world without paying those fees (assuming the merchant accepts Discover).
- No pay-by-phone fee. Need to make a payment by phone using your checking account? Some cards will charge you $5 or $10 bucks to do this, but not Discover.
- Free FICO score on your monthly statement. This card gives you your real FICO score from TransUnion on your monthly statements. Considering the fact that you probably got a credit card to build your credit, being able to monitor your progress for free is a huge perk. That score would otherwise cost you $20 every time you check it.
- No late fee on your first late payment. Normally, late payments can cost you up to $35 a pop. But with this card, at least you get one freebie. That’s definitely helpful during college finals when you may forget.
- No interest rate increases for paying late. A lot of cards will jack up your APR if you ever pay late. This one won’t do that.
Compare the student credit cards for yourself…
Worried about your card not being accepted? Discover is accepted at more than 94 percent of the top 2,000 internet retailers and more than 8 million businesses. You can use them almost everywhere that takes Visa and MasterCard.
Best Sign-up Offers (updated January 2016)
You won’t find these promotions everywhere, but I’m listing both here so you can choose the one that’s best for your needs.
Discover it® for Students:
Offer #1: Get a 0 percent intro APR for 6 months on purchases. After that, it’s a standard variable purchase APR of 13.24 percent to 22.24 percent.
Discover it® chrome for Students:
Oh yeah, and here’s some important advice you not know about credit cards. In fact, a lot of old people don’t even know these things:
#1 – Build credit even without a balance
One of the reasons people start getting into debt is because they think it’s actually good for their credit score to have a balance. But this is completely wrong and doing so can actually harm your credit!
There is a huge difference between “carrying a balance” (allowing a balance to carry on past the due date and paying interest) and “reporting a balance” (having a balance when your billing cycle closes). When your billing cycle closes each month, the amount due is what’s reported to the credit bureaus. If you then pay that reported balance in full, you won’t have to pay interest, and you’ll get all the credit-building benefits.
So if you are regularly using your Discover card, you have the ability to build your credit… carrying a balance into the next billing cycle (and paying interest on it) offers absolutely no benefit to your credit score.
#2 – Carrying a large balance may hurt your credit
Even though you should let a balance report each month, keep it small.
The percentage of your credit limit you use – known as credit utilization – is factored into your FICO credit score. Having high utilization is actually bad. Banks like people that have a lot of credit but don’t use it! With the FICO formula, using above 30 percent of your credit limit may negatively affect your credit core.
The simple solution? Once you get your student credit card, always stay below 30 percent of your credit limit. Make multiple payments each month to keep it below that mark.
#3 – A better score means cheaper student loans
Let’s be honest here… college tuition is out of control! If you’re going to be taking out more loans to finish your degree, of course you want to get the best interest rate possible. Well, whether you get a good rate or bad rate depends on your credit score and history.
This is why it’s so important to not screw up with your new Discover student credit card, or any credit account for that matter. Use your cards responsibly – pay your bills on time and in full, and keep your credit utilization in check (as discussed above). Doing this will help build up your credit and you will be thankful for that when it comes time to get a loan.