First Credit Card for Students: What to Know Before You Apply

Everyone has to start building a credit history somewhere, and for many young people that begins with the first credit card they get while in college or university.

Financial institutions know that the first card a student receives is likely to stay in place for years, creating a long-standing relationship between the customer and the bank.

These student credit products are intentionally “sticky,” says Robin Taub, a chartered professional accountant in Toronto and author of The Wisest Investment: Teaching Your Kids to Be Responsible, Independent and Money-Smart for Life.

“Once you establish a relationship and open a card or accounts with one bank, you rarely switch,” she explains. “That’s why you see so many credit card promotions and kiosks on campus.”

Because the card you choose can become a long-term account, Taub urges students to be selective when faced with flashy giveaways and freebies.

What to look for in a student credit card

When selecting a student credit card, the three main factors to weigh are annual fees, interest rates, and rewards. Aim for the lowest possible fees and interest, and choose rewards that match your lifestyle and spending patterns.

Most credit cards carry interest rates near 20%, with cash advance rates typically higher. Sometimes promotional rates are offered at signup, but students should try to avoid paying interest at all.

“Pay attention to the minimum payment that the statement highlights,” Taub advises. “Don’t just pay the minimum, because that means you’ll carry a balance that accrues interest.”

She recommends paying the full statement balance and paying on time to avoid interest charges and penalties while also building a positive credit history.

Tips on building a credit score

Paying the full balance each month demonstrates responsible credit use: your spending stays within your means and you are budgeting effectively. Thuy Lam, a certified financial planner at Objective Financial Partners, notes that students can still get into serious trouble if they mismanage credit.

“I’ve seen students accumulate $20,000, $30,000, even $40,000 of credit card debt because they don’t realize it isn’t free money,” Lam says.

Get a low credit limit when you start and resist offers to increase it until you’ve established disciplined spending habits. For students with limited income or savings, a credit card may only need to be used sparingly.

One practical strategy is to put a small recurring bill—such as a phone plan—on the card. A modest recurring charge that you can pay in full each month creates a reliable record of on-time payments, which helps build credit.

“The purpose of a credit card is twofold for students: to facilitate small recurring payments and to establish credit,” Lam says. “It’s not a tool for unrestricted spending. Because we live in a credit-based system, it’s important to establish a healthy credit history early.”

Are rewards credit cards good for students?

Rewards cards can suit some students, especially those who have parental support, savings, RESPs, or scholarships that allow them to travel or enjoy lifestyle perks. For many others who are financially stretched—recent surveys show many students feel unstable—a simple cash-back card may be more practical.

Lam cautions that rewards are sometimes a flashy lure for students who aren’t yet able to earn meaningful value from them. Her typical recommendation is a no-fee card with straightforward percentage cash back, either on groceries or on overall spending, and to stick with one card at the start.

What comes next

As your credit score strengthens and your finances improve, you may receive offers for additional cards with enhanced benefits or large signup bonuses. Even if you add a new card, Lam stresses the value of keeping your first card open for its length of credit history.

“History and a long track record are very important,” she says. “For the best long-term credit score, keep at least one long-standing card rather than cancelling it when you open another.”

Move slowly: keep limits low, build consistent budgeting and payment habits, and review your card activity regularly. Lam suggests setting aside a few minutes each month to check transactions and statements.

Spotting errors, unauthorized charges, or missed refunds quickly helps limit damage—and reviewing your statement is also a chance to reflect on whether your spending matches your intentions.

Read more about student finances:

• How to pay for school and still have a life — a guide for students and parents
• Six practical money-saving tips for post-secondary students
• How a student can build credit while earning travel rewards
• RESPs 101: Understanding withdrawal rules