How Do College Students Build Credit with Secured Credit Cards?

Attending college is like stepping into a new world, where independence isn't just about living away from home—it's also about making smart financial decisions. One of the best ways to set yourself up for future success is by building your credit early. And guess what? A secured credit card might be your golden ticket. But what is a secured credit card, and how do you build credit in college? Let's break it down.

What is a Secured Credit Card?

A secured credit card is like your training wheels in the credit world. Unlike traditional credit cards, secured cards require a cash deposit upfront. This deposit acts as your credit limit. For example, if you put down $300, that's how much you can spend. This credit building system is a great strategy because it helps you build trust with lenders, even if you're new to credit.

Why choose a secured card over a regular, unsecured one? Well, without a credit history, getting approved for a traditional card can be tough. A secured card is the best way to build credit because it's more accessible, giving you a chance to prove your creditworthiness. It's like a credit card with a safety net, ensuring you can’t spend more than what you have deposited.

To review the basics of credit and its many concepts, revisit our previous article: Everything You Need to Know About Credit.

Why Build Credit in College?

Building credit in college is crucial. It's not just about bragging rights; it's about creating the best opportunities for your future. A strong credit score can make it easier to rent an apartment, get a car loan, and receive better insurance rates. It can even impact certain job prospects! In fact, some employers check your credit to gauge responsibility, especially for positions in the government or financial industry.

Starting early means you can graduate with a solid credit history. This head start provides a smoother transition into post-college life when you are "adulting" for the first time. You can become financially independent and make your own choices without relying on your parents or friends for help.

How Do You Build Credit with a Secured Credit Card?

Using a secured card responsibly is like planting a tree and watching it grow. Here's how to build your credit:

1. Choose the Right Secured Card: Just like selecting the right college, picking the best secured credit card is important. Look for one with low fees, a reasonable deposit requirement, and reports to all three major credit bureaus (Experian, Equifax, and TransUnion).
2. Make a Security Deposit: The deposit you make becomes your credit limit. Start with a manageable amount, typically $200-$500, to avoid exceeding your budget.
3. Use the Card Responsibly: Make small, regular purchases—like groceries or gas—that you know you can pay off each month. Aim to keep your balance below 30% of your credit limit to maintain a good credit utilization ratio.
4. Pay Your Bill on Time: Just as meeting deadlines for assignments and exams is crucial for good grades, paying your credit card bill on time every month is essential for a good credit score. Timely payments are one of the most critical factors in building a positive credit history. (TIP: Set up reminders or automatic payments to help you stay on track.)
5. Monitor Your Credit Score: Keep track of your credit score regularly. Many secured credit cards offer free access to your credit score. This will help you see the impact of your financial habits and credit usage.
6. Avoid Common Pitfalls: Don’t max out your card, miss payments, or apply for too many credit accounts at once, as these can negatively impact your credit score.
7. Upgrade to an Unsecured Card: After consistently making on-time payments for several months, you might be able to graduate to an unsecured credit card. This credit card option doesn’t require a deposit and can give you more financial benefits.

Best Credit Card for Building Credit in College

Ready to kickstart your credit journey? A secured credit card is your go-to tool, especially if you’re new to credit or looking to raise your score. Academy Bank’s Credit Builder Secured Visa® Credit Card is perfect for college students who want to build credit in a simple and manageable way. Your cash deposit sets your spending limit, which helps you stay in control while you establish good credit habits.

Here’s why Academy Bank’s Credit Builder is the best credit card to build credit:

• You set your own credit limit, from $300 to $3,000
• Automatic reporting to the three major credit bureaus to help build your credit history
• No annual fees, application fees, or over-limit fees
• Easy application—just have your ID, social security number, and a few other details ready
• Quick and secure online transactions with Visa® Secure Remote Commerce

Start building your credit and set yourself up for financial success after graduation. Ready to begin? Apply for our Credit Builder Secured Credit Card, get tips on managing credit, or use our financial calculators to stay on track (including the Credit Assessment Calculator and Credit Card Payoff Calculator).

 

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Subject to credit approval. Transaction and Penalty fees apply. Credit Builder Savings account required. $5.00 quarterly fee charged to the Credit Builder Savings account if not enrolled in eStatements. Improved credit score is not guaranteed. Credit score is determined by credit reporting agencies based on multiple factors, but satisfactory performance on a credit card product can improve your credit score. Default on a credit card, including missed or late payments can damage your credit score. Once added, funds cannot be withdrawn from the Credit Builder Savings account and the Credit Builder Credit Card without closing the savings account and the credit card.