In a world of digital — well, everything — credit cards are a secure, convenient way to make purchases. As such, they’re more of a necessity than a luxury. This goes for college students as much as it does for anyone else — which begs the question of how to find a credit card for students with no income.
Credit card companies want to know you can pay your credit card bills (and who can blame them?). But card issuers also understand that students aren’t exactly making six-figure salaries. They’re also a bit flexible on what types of income they’ll accept, especially when it comes to student credit cards.
Before you assume you won’t qualify, consider whether a student credit card could work for you. We’ll talk more about student credit card requirements and discuss a few alternatives for building and using credit.
You may have enough income for a student credit card
Without a doubt, the very best credit card for students is the aptly named student credit card. Nearly every major issuer offers a student credit card, and most won’t charge an annual fee. Many student cards will also come with cash rewards.
What’s most important about a student credit card, at least for our purposes now, is that they’re specifically designed for students. This includes having flexible income qualifications that make it easier for college students — and their limited earnings — to get approved.
Even a modest income of a few thousand dollars a year could qualify you for a student credit card. And you’re not necessarily limited to traditional employment income; many card issuers will allow you to count certain types of financial aid, like scholarship and grant money, as income for the purposes of a student credit card application.
Some things you shouldn’t count as income for a student card are gifts or allowances. Just because your parents send you money every month doesn’t mean it will count as income on your student credit card application. If you’re unsure if something will qualify as income, simply reach out to a potential credit card issuer and ask.
Student credit cards may offer student rewards on everyday purchases and can also reward student-specific spending, such as books or groceries. You’ll also want a card that reports your payments to the credit bureaus to help build your credit history.
Secured credit cards also have flexible requirements
If you’ve tried the student credit card route and come up dry, a secured credit card may be a good option. The only difference between a secured card and an unsecured card is that secured cards require collateral.
Opening a secured credit card requires making a refundable security deposit. The minimum deposit will vary, but expect to put down a fixed deposit of at least $200. The bank will hold the deposit in a locked account, and it will go untouched so long as you don’t default on your credit card balance. The amount of cash you put down will dictate your credit limit.
Since a secured credit card comes with minimal risk for the card issuer, it can afford to be flexible about income and credit rating requirements. You may qualify with a low, or even no, income.
As you use your secured card and pay it off in full each month, you’ll build credit. Eventually, your issuer may upgrade your secured card to an unsecured credit card and refund your deposit. You can also get your deposit back by canceling your secured card account, as long as you don’t have an outstanding balance.
You may need to work together
If you’re struggling with how to find a credit card for a student with no income, and you’ve struck out on both a student credit card and a secured card, you may need to get someone else involved. Specifically, you may need a cosigner or to become an authorized user.
Cosigners can act as collateral for students with no income
A small handful of major credit card issuers will sometimes allow you to apply for a credit card with a qualified cosigner. In particular, Bank of America and U.S. Bank are occasionally known to approve credit card cosigners.
Briefly, a cosigner is someone who puts their own credit and income up as collateral for someone else. So, the student would be the primary user on the card, while the cosigner merely agrees to pay the debts should the student default.
Becoming a cosigner is a big decision, as the cosigner’s credit can be damaged if payments are late — or stop coming altogether. The cosigner is also ultimately responsible for repaying the balance, and they’ll likely be who the collection agency comes after if things go sideways.
Authorized users don’t need any income
When you sign up for a credit card with a cosigner, both you and the cosigner take on financial and credit risk. If the primary cardholder messes up, everyone’s credit score suffers. With an authorized user situation, however, the risk is a lot more (but not entirely) one-sided.
Authorized users are people who have the ability to charge purchases to a credit card account — but do not have legal liability to pay the balance. Basically, someone else is the primary cardholder on the account. The authorized user can get a card in their name tied to the account and can make purchases as if it were their own.
Conveniently, when someone becomes an authorized user on an account, that account tends to be reported to the credit bureaus for both the primary account holder and the authorized user. This could mean an instant credit history (and credit score) for a student who previously had none.
While this may sound like a no-brainer for building credit, it can definitely backfire if the authorized user isn’t particularly responsible. Giving a student a credit card they can use freely — but have no responsibility to pay for — could end up being very costly for the main account holder.
Conversely, the problems of the main account holder can also become the problem of the authorized user. Missed payments or high balances will show up on the authorized user’s reports, too. For this reason, it’s imperative to add an authorized user to an account with a good credit history that is used responsibly.
Not all card companies report authorized users to the credit bureaus, but most major issuers will do so. To see what’s being reported, simply check your credit report. You can get a free credit report from each main consumer credit bureau — Equifax, Experian, and TransUnion — once a year. (It’s a good idea to check your credit reports at least once a year anyway.)
A few last bits of advice
By taking advantage of one of these solutions, you’ll know how to find a credit card for students with no income. Hopefully, you’ve seen that no income doesn’t have to mean no options.
That said, keep in mind that scams abound. You may be tempted to make your own luck with a card with no income requirements just to get some credit. But any credit card company that promotes a “credit card no income” deal is unlikely to be on the up-and-up.
One final thing to note. Just as the type of card you apply for matters — a student credit card has different pros and cons than a secured card, for instance — where you apply will also make a difference.
Most of the major credit card issuers offer options for the income-limited, but they’re not your only option. Your local credit union may be more forgiving of your lack of income than a big bank with a board of investors to satisfy. Similarly, the bank that already handles your checking account may be more likely to approve you for additional products.
View more information: https://www.fool.com/the-ascent/credit-cards/how-get-credit-card-for-student-no-income/