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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 regulations from the Consumer Financial Protection Bureau (CFPB). Consequently, your income will not only help determine if you’re approved or not, 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 your own income.
In fact, when applying for a credit card as a student, you may include any current or reasonably expected income that proves you have the ability to pay the issuer back. This includes both your direct income and any third-party income that you have access to.
That said, those under 21 are treated differently from those 21 and above.
Eligible income for students under 21
The CFPB has established special restrictions for banks providing credit cards to those under the age of 21. 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.
This typically means that students age 18-20 can only report:
- Personal income from current work or regular allowances.
- 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 those to which you only 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.
- Income from 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. As stated above, 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
If you apply for a credit card and you’re not approved, there are other options you can explore:
Become an authorized user
Becoming an authorized user on someone else’s credit card is a bit 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. 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 actually having to do anything. However, 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.
Get a secured credit card
Getting a secured credit card is an option if you want to have your own credit card account but don’t have a strong credit history yet. You apply for a secured card in the same way you would a traditional credit card. However, there are some important differences. For starters, it is easier to get approval for a secured credit card because you’ll be required to make a deposit. Your credit line will come from this deposit, which is usually refundable when you close the account or upgrade to an unsecured card. It may sound similar to a debit card because it is. The difference is that a using secured credit card can build credit, and using a debit card won’t.
Get a debit card
Having a credit card is a great way to build credit, but now may simply not be the time to get one. As a student, you have lots of responsibilities. If you don’t want to add a credit card payment to that list, getting a debit card is another way to go. Most debit cards can be used to make card payments and purchases online. You will just have to make sure you have the cash in your account for any purchases you want to make. You won’t, however, have to worry about paying anything off at a later date. You also won’t have to worry about added interest on any of your purchases.
Get a co-signer
A credit card co-signer takes on equal responsibility for your credit card and can offer their income for your application. The co-signer 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 very 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 the account monthly should qualify, as long as it’s verifiable.
If your credit card is not approved, you have other options, such as getting someone to co-sign your card, applying for a secured card 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.