Jump to content

Menu

Secured Credit Card for College Student


Tammi K
 Share

Recommended Posts

Oh Great Hive, I need your collective wisdom.  My son (22 yrs old) is looking to start establishing a credit history.  He has a job (R.A. on campus as well as an instructor at Bricks4Kidz) , is extremely frugal, and not the kind of kid to get in financial trouble by over use of credit.  He talked to his bank for recommendations and the adviser recommended a secured card for his initial card however, his bank doesn't offer a secured one and doesn't issue a standard card without a credit history. 

 

He found a site online that lists several sources of secured cards along with ratings of the card. However, he would feel better hearing from real, live people who have experience with applying for secured cards.

 

If any of you have collage age kiddos or young adults starting out who have applied for a secured card and are happy with the service, could you please pass along the name of the bank you used and any advise you might want to share?  I'll pass along any info to him.

  • Like 1
Link to comment
Share on other sites

Couple years ago Chase offered my oldest dd a secured card.  If she left $300 in an account as collateral she'd get a card with a $300 limit,  If she used it wisely than after 18 months they would release the $300 and it would be a "real" card (and possibly higher limit depending on her income).

 

 

Eons ago, I got my first cart from Bank of America with a $100 limit (hey, it was in the 1980s) as long as my Dad was on it, too.  Eventually he was removed and the limit raised.  Had that card for years.

  • Like 1
Link to comment
Share on other sites

My oldest dd got a secured card with either Bank of America or Wells Fargo, I can't remember which one, but that was where she was banking. I don't know if they would offer it to a non-member, but it's worth asking. It was a $300 secured amount and they released the money and raised her credit limit between 6 months and a year. I don't remember exactly when but we were all surprised when it happened.

  • Like 1
Link to comment
Share on other sites

I have one (mostly because we don't believe in using credit cards, but this is a nice backup).  I went through USAA.  You choose the amount, from $300 to I think $10000, and the money is put into a CD that earns interest, maturing after 2 years.  There is an annual fee of about $50, and the interest can be high.  It's better for young adults to think of it like a charge card, not a credit card.  They should get into the habit of paying the balance ASAP to avoid interest - let the bank work for them, not the other way around.  They should also put a personal limit of not more than 50% of the card's value - if their credit limit is $300, they should have no more than $150 on it at any given time.  The more debt %, the lower the credit score.

If he has a bank account, I would suggest applying first with them.  He may get a better deal than going elsewhere.

  • Like 1
Link to comment
Share on other sites

The more debt %, the lower the credit score.

 

This is what I don't understand. My dd uses Credit Karma. She showed me this week how it rates credit by the number of credit lines you have open. She only has three and it says she has a poor rating, although I should say her actual credit score is super great. Anyway, the excellent rating is for people with 21+ credit accounts open. Even I don't have anywhere near that! What could they mean?

Link to comment
Share on other sites

Dh and I use Credit Karma.  We both score excellent, though mine is slightly lower than his.  I have a secured card, no car payment (it was paid off years ago).  He has a car payment and carries the mortgage.  It's percentage of debt to credit and length of credit that is a big deal.  My debt is kept at about 1-3% of the available credit, and has been established for several years.   When I was 19-20, I scored in the 500s.  I just didn't have the time put in, only kept one card, and paid for my car with cash.  By about age 25 it was much better.

They do want to see a few lines open of varying degrees (credit, loan, etc), but you never want the debt to be too high - enough to show you are a good borrower, but not enough to show you depend on borrowing.  Your dd should be able to climb up by just being prudent with her credit and making good choices.  I don't know why CK would show you need 21 or more accounts open!  That's too much!

Link to comment
Share on other sites

This is what I don't understand. My dd uses Credit Karma. She showed me this week how it rates credit by the number of credit lines you have open. She only has three and it says she has a poor rating, although I should say her actual credit score is super great. Anyway, the excellent rating is for people with 21+ credit accounts open. Even I don't have anywhere near that! What could they mean?

 

They mean people who have had 21 accounts over the previous 7 years.

 

  1. IE:  a mortgage where you owe less than 30% of the value of the home
  2. Student loans paid on time.
  3. a car loan or 4, paid off immediately or early, with both spouses party to the loans  (even if you have cash for a vehicle, you can usually save at least $1000 if you agree to finance it and then pay it off immediately)
  4. 3-5 long term credit card accounts that you've had more than 10 years and always pay off in less than 30 days, probably mostly used for points or miles.
  5.  2-3 times a year when shopping, take out a credit card in store for an extra discount, then immediately pay off the account and close the card in less than 45 days. Why?  Because you want to keep your average account length for open accounts long, and if you close these accounts immediately your average open account history is shorter.

Really though, focusing on savings should be what a child does.  If they can save 30% down and have a decent paying job, they'll be given a mortgage, which is probably the only debt that young people should have.  After you get a mortgage your credit rating goes up a lot, immediately.

  • Like 1
Link to comment
Share on other sites

This is what I don't understand. My dd uses Credit Karma. She showed me this week how it rates credit by the number of credit lines you have open. She only has three and it says she has a poor rating, although I should say her actual credit score is super great. Anyway, the excellent rating is for people with 21+ credit accounts open. Even I don't have anywhere near that! What could they mean?

 

Credit score is based on a LOT of things.

 

One is the percentage of available credit that is being used.  That could be one credit card with a high limit ($15,000 - $20,000) where only a few hundred or a thousand is being used.  Another way is to have a lot of lower limit accounts and only owe a small amount total.

 

Credit history counts a lot toward credit score.  And of course that takes a long time to build.  It's one reason why people with the highest credit scores tend to be older (40s and up).  The agencies like to see people who've had the same credit cards for years and years, who have been paying their mortgage and car loans on time for years, etc.

 

Having/having had different types of debt matters.  Mortgage, car loans, credit cards, etc.

Edited by Pawz4me
Link to comment
Share on other sites

When I was in college I had a secured card from the local credit union. I don't know why, but credit unions are so much easier to deal with than banks (with the exception of usaa) ime.

Link to comment
Share on other sites

I have a secured credit card with Wells Fargo and Citibank after we moved to the states so that I can have credit history as a SAHM in case anything happen to hubby. It was easy to apply, just need to put a certain amount as collateral for the card which the bank return after a year.

  • Like 2
Link to comment
Share on other sites

He might want to look at a credit union first time card. Our credit union offers unsecured cards (which, if you are good with money, are better than secured because you don't have to tie up any funds) for 18+ as long as you have a source of income and a checking account with them. The limit is $500 and goes to $1000 after a year of responsible use. Most importantly, there is no annual fee, which is not the case for many secured cards (and disqualifies them right off the bat, IMO).

 

At 22, with a source of income, he is probably eligible for all sorts of cards. Given that he is frugal and won't be carrying a balance forward, he should look for a no fee card, whether secured or not secured.

  • Like 1
Link to comment
Share on other sites

My dd has a credit score in the 700s. She has one card that is a secondary on my account, a debit card on her own that she rarely uses, and a couple of store credit cards (really easy to get) that she uses regularly and pays off monthly. She also has apartment rental (with me as a whateveryoucallit to allow her to rent) at college with utilities that she has paid for the last couple of years. Stores and apartments (she is about to change) are always in shock when they see her credit score. The debit card and secondary credit card she has had for 7 years (since she was 16). She has never taken out any loans.

  • Like 1
Link to comment
Share on other sites

When I was in college I had a secured card from the local credit union. I don't know why, but credit unions are so much easier to deal with than banks (with the exception of usaa) ime.

I prefer credit unions too. In some ways ours is more strict than a normal bank (especially on larger loans) but once you're a member they're generous and flexible and the rates are excellent, especially for basic business and personal checking and credit accounts.

Edited by Arctic Mama
Link to comment
Share on other sites

Yes, my advice to my kids is always start with a credit union. It's good to compare several options when looking for financial services, but at least one should always be a credit union.

 

After the financial meltdown, my little act of protest was to shift as much of my business away from the larger banks and give it to credit unions. The good service and better products were a big bonus. I wish I had done it even earlier, but I thought there were rules about joining and didn't figure I'd qualify. Turns out anyone can join the one we use.

  • Like 1
Link to comment
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

 Share

×
×
  • Create New...