Key takeaways
- Students under 21 can only report personal income, allowances from family members and residual scholarship/grant money after tuition and college expenses.
- Students over 21 can also report income from self-employment, household income and other financial aid.
- Unemployed students can choose alternatives including becoming an authorized user, getting a secured credit card, getting a debit card that builds credit or finding a co-signer.
If you’re a student and interested in starting to build credit, a student credit card can help. There are quite a few options out there and applying is easy — if you know how to fill in key information.
Credit card issuers want to know your income to make sure you’re able to keep up with minimum payments on your credit card, as required by federal law. Consequently, your income will not only help determine if you’re approved, but it will also determine how big your credit line will be, making it one of the most important items on your application.
This may present an obstacle if you’re a full-time student, so it’s important to know what counts as income to give you the best chance of getting that new credit card.
What can a student include as income when applying for a credit card?
You may think that you won’t be able to report any income if you’re a student and don’t have a job. However, you can claim more than just income from a traditional job or paycheck.
The good news is that card issuers define income very broadly. It’s not just full-time work. Part-time and seasonal income counts, including summer and campus jobs. You can even count a regular allowance or stipend from a parent or other relative. And some scholarships and grants count, especially if there’s money left over after paying tuition.
— Ted Rossman, senior industry analyst at Bankrate
In fact, you may include any current or reasonably expected income that proves you have the ability to pay the issuer back. Keep in mind, though, that those under 21 are treated differently from those 21 and older. While you have some options when it comes to showing income, the bar can be high when it comes to proving that income for individuals ages 18-20.
Eligible income for students under 21
The CARD Act of 2009 has established special restrictions for banks providing credit cards to those under the age of 21, even if they’re applying for a secured card. These restrictions require that they either have an independent ability to make minimum payments or have a co-signer who is at least 21 and agrees to become liable for the debt on the account. Most major issuers, however, no longer issue co-signed credit card accounts.
Therefore, to qualify for a credit card under the age of 21, students ages 18-20 can only report:
- Personal income from a job or work study program
- Regular allowances from a family member
- Residual amount from scholarships and other financial aid (not student loans) after paying tuition and other college expenses
Eligible income for students 21 or older
If you’re over 21, you are no longer required to have a co-signer and are allowed to include more sources of income, including household income to which you have a “reasonable expectation of access.” This means that you may include:
- Personal income, including current or expected wages, salary, bonus pay, tips and commissions from either full-time, part-time or casual employment
- Income from self-employment, including freelance work or side hustles, like private tutoring, provided you can show proof of that income in the form of a bank statement or other verifiable document
- Allowances and gifts from your parents, family or other third parties
- Household income that includes the incomes of a spouse or partner
- Scholarships, grants and other financial aid, but only what’s left after your tuition and other covered college expenses
What doesn’t count as income?
Knowing what income you shouldn’t include in your application is as important as knowing which you should. In this sense, you should avoid reporting:
- Borrowed money, such as your student loan. Although money is technically coming into your account, it’s debt, not income
- False or nonexistent income. Besides being turned down, lying on your application counts as fraud and you could be fined or worse
- Any income you don’t have access to, such as garnished wages for child support or alimony
What is the minimum income to be approved for a credit card?
While a higher income will generally give you a better chance of being approved for a credit card, there’s no set amount of income that will guarantee approval. What matters to the issuer is that you can afford minimum payments on your credit card. That comes down to how much disposable income you have after paying for necessities, like rent.
If you don’t have a lot of disposable income, you shouldn’t be discouraged, nor should you feel tempted to lie in your application. As little as $100 could be enough to be approved for your first credit card, albeit with a low credit limit.
Always keep in mind that a credit card is meant to be a tool to make paying easier and to help you with emergencies and small purchases, not as a way to pay for things you can’t afford.
What to do if you don’t have enough income for a credit card
Before you jump in to applying for a student credit card without income, you might want to consider some other options. These alternatives can also work if you applied for a student credit card and got declined.
Become an authorized user
Becoming an authorized user on someone else’s credit card is easier than getting a card with a co-signer. It will give you access to a shared line of credit and will also help you build up your credit score if the primary cardholder is responsible with the account. The primary cardholder remains responsible for making any payments on the card, and their positive financial habits can give you a financial boost without you having to do anything.
That’s what Rhys Subitch, senior editor at Bankrate, did to build their credit score during college. Just before going to college, their parents added them as an authorized user to an Alaska Airlines credit card to help Subitch build credit — a card they’re still using 16 years later. It also helped them qualify for a healthy credit line when they were ready to apply as a primary cardholder.
“After a few years I got bumped from an authorized user to a joint account holder,” Subitch shares. “I didn’t end up applying for a credit card myself until I was three or four years into college, but when I did it was with my local credit union and I got a fairly large credit line.
“I still have the original card because it’s an Alaska Airlines one,” Subitch continues, “and I don’t want to lose out on miles or my annual companion fare.”
While you might think your parents seeing all of your transactions is cringe, it could prove to be useful in preventing overspending while you’re learning to use credit cards responsibly.
I think the biggest benefit was being beholden to my folks. If I used it too much it would raise brows, and that kept my spending in check during a time where it would be really easy to give in and impulse spend.
— Rhys Subitch, Senior Editor at Bankrate
However, being an authorized user isn’t always the right move for everyone. If the primary cardholder falls behind on payments, your credit score will likely take a hit, too. Be sure to set up clear guidelines for what your responsibilities will be to the primary cardholder before you are added as an authorized user. And don’t agree to be an authorized user unless the primary account holder has a track record of solid financial responsibility.
Get a debit card
In recent years, alternatives to student credit cards have popped up that allow you to build credit without the dangers of racking up credit card debt. These types of debit cards connect directly to your existing bank account and give you a credit line that reflects your current balance so you can’t overspend or go into debt. Plus these cards typically don’t do a hard inquiry on your credit or have a minimum credit score to apply. These are some of the debit cards that can help you build credit:
As you use a debit card like Extra, you can make automated payments for what you’ve spent which come from your connected bank account. Those transactions and your payments are then reported to the credit bureaus as part of your credit history.
However, if you miss a payment or make a late payment that will still show up as negative information on your credit report. If you don’t feel quite ready for a full-blown credit card yet, this can be a great way to test the waters and build credit without the risk of getting into debt.
Get a co-signer
A credit card co-signer takes on equal responsibility for your credit card and can offer their income and credit score for your application. The co-signer, unlike an authorized user, will also have equal responsibility for any charges and payments on the card. Unfortunately, the list of credit card issuers that allow co-signers is small these days. Most major issuers have phased out this option, but some smaller credit unions and banks still allow it.
The bottom line
To be eligible for a student credit card, you need to show your income is high enough to make timely payments. The list of what can count as income will depend on whether you are under 21 years old. If you’re over 21, any money that comes into your account monthly should qualify, as long as it’s verifiable.
If you can’t meet the income requirements, you have other options, such as getting a cosigner, applying for a secured card, getting a debit card that builds credit or becoming an authorized user on someone else’s credit card. Responsible use of any of these alternatives can help you build your credit history, and boost your score, to improve your odds of approval in the future.
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