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You’ve probably been told that you need to get a credit card to start building credit. You might also have shivered in fear at the very suggestion. Aren’t credit cards how people end up in debt?
Not necessarily. Managing a credit card can be simple, but not necessarily easy. It can be simple to avoid common credit card mistakes students make. That’s why Journey® Student Rewards from Capital One® is one of our favorite student credit cards.
This credit card actually rewards you for developing good credit habits. And if you can establish and cement good credit habits while you’re young, you could set yourself up for a lifetime of credit success — no financial stress needed.
|What we like||Heads up|
- The rundown: Everything we like about the Journey® Student Rewards from Capital One® card
- Heads up: What you should consider before applying for Journey® Student Rewards from Capital One®
- Do the math: How to get the most out of the Journey® Student Rewards from Capital One® card
- The competition: How the Journey® Student Rewards from Capital One® card stacks up against similar cards
- Bottom line: Is the Journey® Student Rewards from Capital One® card right for you?
The most important thing to know about using credit cards is that you need to pay your bill on time, every time. Even one slip-up can have serious consequences. The Journey® Student Rewards from Capital One® card provides an extra carrot on a stick by rewarding you for developing this good behavior.
Here’s what we like most about the card:
Access to higher credit limit
If you pay your bill on time for five months in a row, Capital One will automatically reward you by boosting your credit limit through its Credit Steps program, which can lower your credit utilization rate. As a rule of thumb, it’s best to keep your credit utilization under 30 percent.
You’ll be approved for at least a $300 credit limit right out of the gate with this credit card. If this is your credit limit, carrying a balance of just $90 could bring your credit utilization rate all the way up to 30 percent, which is why raising your credit limit can be so helpful.
“Basically, raising your credit limit results in more breathing room between your balance and your limit, which may result in higher credit scores,” says HighYa credit card expert J.R. Duren.
Rewards for responsibility
Additionally, Capital One will reward you with an extra 0.25 percent cash back boost for each monthly on-time payment. With the 1 percent standard cash back rate, that means you can earn up to 1.25 percent cash back on all your purchases.
These bonuses are nice, but they’re just that — bonuses. They won’t actually do the work of keeping your expenses low and paying off your credit card each month for you. They can, however, provide that little extra nudge you might need to develop good credit habits.
Just ask Aaron Katz of financial education website Growella, whose first credit card was the Journey® Student Rewards from Capital One®.
“The card has helped me understand what it’s like to have a credit card, owe balances and apply rewards,” he says. “It has helped me tremendously in building my credit and being eligible for more great credit card offers.”
While this is a great student credit card, it’s not for everybody. Here are some things to consider before applying for this card:
You’ll need to have some form of income
Yes, it’s true: You will need some way to pay off your credit card. If you’re relying on your own income (not a parent’s income), you’ll need to earn at least $425 per month above your rent or mortgage payment.
Look out for a relatively high APR
This card comes with a variable 24.99 percent annual percentage rate for purchases and balance transfers. That’s an interest rate you do not want to pay. However, if you pay off the card balance in full and on time each month, you won’t pay a single cent of interest. Think long and hard about whether you’ll be able to pay off all the charges you make each month.
Remember to pay your bill on time
In case you needed another incentive to make your payments on time, you’ll be slapped with a fee of up to $35 each time you make a late payment.
To come out ahead with this card, there are really only two things you need to do: pay off your bill in full and do it on time each month.
Why? You won’t pay the super-high interest rates if you don’t carry a balance from month to month.What is the average APR on a credit card?
It can be tempting to make a lot of purchases and offer to pay for rounds of drinks and appetizers while out with friends, especially when you know you’ll be rewarded with cash back. But here’s the reality: a variable 24.99 percent APR will usually cancel out any cash back rewards if you regularly carry a balance.
There are a few tricks to help you avoid paying interest and unnecessary fees:
- Don’t charge something on your credit card unless you know you already have the cash to pay it off, or will have the cash before the bill is due.
- Mark when the bill is due on your calendar, or set up a reminder in your phone. You can also set up automatic payments each month so you don’t have to worry about it.
The competition: How the Journey® Student Rewards from Capital One® card stacks up against similar cards
|Discover it® for Students||5 percent cash back in rotating categories (up to a quarterly maximum, then 1 percent), cash back match at end of first year and $20 cash back each school year your GPA is 3.0 or higher (you can qualify for up to five years)|
|Discover it® Chrome for Students||2 percent cash back when you use for gas and restaurants on up to $1,000 in combined purchases each quarter (then 1 percent), cash back match at end of first year and $20 cash back each school year your GPA is 3.0 or higher (you can qualify for up to five years)|
|Citi ThankYou® Preferred Card for College Students||2 points per dollar spent on dining out and entertainment, 2,500 bonus points after spending 500 in purchases within first 3 months of account opening|
Discover it® for Students
If you already know you can manage your credit card well and want to try your hand at earning more rewards, Discover it® for Students is a great choice.
You can earn up to 5 percent cash back in rotating quarterly categories like Amazon.com purchases, drug stores and dining out, and 1 percent cash back on all other purchases. Plus, you’ll get a cash back match at the end of your first year and a $20 bonus each school year that your GPA is 3.0 or higher. You can qualify for the bonus for up to five consecutive years.
Discover it® Chrome for Students
If the Discover it® for Students card sounds like a good pick for you but you also drive and eat out a lot, consider the Discover it® Chrome for Students. You’ll earn less — 2 percent cash back vs. 5 percent cash back — but you’ll earn it consistently without having to fuss around with changing categories each quarter.
Citi ThankYou® Preferred Card for College Students
From cardholders in the last year
If you’re a big spender on dining out and entertainment, you can earn more cash back rewards — two points per dollar spent on these purchases, to be exact — with the Citi ThankYou® Preferred Card for College Students. Just make sure to keep an eye on your spending so it doesn’t get out of control.
There are many student credit cards from which to choose. If developing good credit habits while building your credit is your top goal, you really can’t go wrong with this card.
If you already know you can manage your credit card wisely and want to try your hand at the rewards game, however, you might consider a different card.
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