It’s virtually inevitable that kids will end up with a credit card someday. Getting your kid a credit card can help them build their credit, and if you monitor their transactions for a bit and guide them, they can learn healthy financial habits. Believe it or not, some of these cards reward kids for things like paying early, staying within their credit limit and even getting good grades.
Each of the major credit card companies makes several cards, with “cool” names like the Mix Tape Credit card or the MTVU card. Just don’t let the names dazzle your kids into whipping them out unless they absolutely need to.
1. Citi Forward® Card for College Students
This card rewards kids for doing the right thing. They’ll receive 100 bonus points if they stay within their credit limit and pay on time. Of course, there’s no reward for paying off their balance each month, so you may have to provide that. If they continue to pay on time, their interest rate, which starts at a minimum of 12.99%, can be reduced by up to two points. Once they make $250 in purchases and sign up for paperless statements, they’ll receive 8,500 bonus points, as long as they do this within three months of opening their account. Rewards include five points per dollar they spend at restaurants, book stores, video rental stores and movie theaters, plus one point per dollar spent on everything else. Points can be redeemed for all kinds of merchandise and gift cards through the Thank You network.
Pros: Rewards good behavior; Kids receive high rewards for common purchases; possible interest rate reductions.
Cons: The Thank You network can be somewhat limited.
Verdict: Good financial habits are established early, and this card can help. It’s not the only one to reward good behavior, but it pairs that with an impressive conventional rewards program.
2. Citi® Dividend Platinum Select® Card
This is the cash-back cousin to our number one pick. The only problem here is that it doesn’t reward good behavior. In fact, earning cash back could cause your kid to rationalize more purchases than they really need. The good part is that during the first six months, they can earn 5% back on convenience stores, utilities, pharmacies and supermarkets. After six months, they earn 1% on everything, with the exception of one category, which rotates every month or two. They must enroll in each reward program to receive more than 1% back.
Pros: Cash back rewards; 0% APR for seven months on purchases.
Cons: No rewards for good behavior.
Verdict: This could be a good lesson in resisting temptation, especially with the first seven months at 0 interest.
3. Citi® mtvU™ Platinum Select® Visa® Card for College Students
While having such a trendy card might not sound like the best idea, it does offer rewards for good behavior, as well as a decent rewards program in its own right. Kids will earn 5 points per dollar spent at entertainment venues such as movie theaters, video stores, music stores and restaurants, among others. Most substantially, they could receive 2,000 points twice a year if they keep their grades up beyond a certain threshold. They’ll also earn 25 points each time they pay on time and without exceeding their credit limit. Points can be redeemed for all kinds of goodies, including tickets to the MTV Music Awards, as well as games, CDS, airline tickets and more. If they use this card, they’ll get 10% off purchases at the MTV online store.
Pros: Rewards excellence; fun rewards program.
Cons: Maximum points are earned through purchases of non-essential items.
Verdict: Though it rewards spending on non-essentials, it’s also the only card that awards good grades, as well as paying on time and staying within your means.
4. Discover® Open Road Card for Students
Many kids like to explore the country while they’re in college or during the summer beforehand. This card ensures they get the maximum rewards for doing so, as it offers double the cash back bonus at any gas station or restaurant for the first $250 in purchases per month. Like most Discover cards, they’ll also earn 1% back on all other purchases beyond $3,000 for the year. Once they earn $20 in rewards, they’re eligible to receive a check. Interest rates start at 13.99%.
Pros: Great for kid who are ready to take a trip.
Cons: No behavior-based incentives; $3,000 is too high for a 1% back threshold.
Verdict: If your kid is ready to hit the open road, this might be the card of choice.
5. Discover® Mix Tape Student Card
We should deduct points for a card with such an antiquated name, but we’ll let it slide this time. Other than that, though, this card is unremarkable, offering 5% cash back in rotating categories and 1% elsewhere, (once you pass $3,000 in purchases, of course,) with the same interest rate as the Open Road Card.
Pros: The name is so last century that your kids may not want to be caught using it. Offers checks in $20 increments.
Cons: Doesn’t reward timely payments; $3,000 floor for 1% back is too high.
Verdict: This is relatively pedestrian for a student card, which could be a good thing. It doesn’t encourage overuse like some of the others in this list.
6. Capital One® Student Rewards Card
Capital One has gotten in on the college student card act, but it uses a stick rather than a carrot. The APR is a whopping 24.9%, which will hopefully encourage your kid not to carry over a balance. Other than that, it offers 2% cash back for purchases at restaurants, books and entertainment, plus 2% back on cell phone bills. All other purchases receive 1% back. Part of the reason for the high APR is that those with fair credit are able to receive it.
Pros: Decent rewards.
Cons: 24.9% APR.
Verdict: If your kid’s credit situation is such that they don’t qualify for a better card, this one is ok. It might be a good idea to go over compound interest beforehand, so they know what will happen if they carry over a balance with this card.
7. Discover Student Card: Monogram Collection
This is very similar to the Mixed Tape card. The only differences appear to be the design. It still offers 1% back on all purchases above $3,000, 0.25% beforehand. Certain categories are eligible for 5% back in certain times of the year.
Pros: Decent rewards program and 13.99% APR.
Cons: 1% bac kicks in at too high a purchase rate for a student card.
Verdict: Not bad, but there’s better out there for student cards.
8. Orchard Bank Classic MasterCard
If credit is a problem, this is the solution. However, it has no rewards and an annual fee, which varies by credit rating.
Pros: Good for building your credit.
Cons: Annual fee; high APR.
Verdict: Only apply for this card if you think it’s absolutely necessary.
9. Public Savings Bank Secured VISA Card
If you don’t qualify for an unsecured card, or if you’d rather your kid not get a full credit card just yet, this card foots the bill nicely. Since it’s secured, you need to deposit money into the account before the card can be used. APR is 11.24%, but there should be no reason to carry a balance.
Pros: Reports to all major credit bureaus to help build credit.
Cons: None, for what it is.
Verdict: A fine idea for those who wish to build credit or otherwise need a secured card.
10. AccountNow(r) Visa(r)
This is a prepaid debit card rather than a credit card, but it could be a good idea for some college students who need to build or rebuild their credit, as well as high-school students who want to ease in to the credit card arena.
Pros: No annual fees or activation fee with direct deposit; helps build credit.
Cons: None.
Verdict: If for any reason you’d rather stay away from credit cards, but you’d like to build credit, this is a good option.
