Back to School: Credit Card Rewards for Students

Our summer intern, Andrew, has been helping me with many things behind-the-scenes here at Prince of Travel over the past few months, and even pitched in with some Amex MR insights and an article of his own earlier in the summer.

Now that his internship is coming to an end, I asked him to sign off with another post of his own, this time focused on maximizing credit card rewards and redeeming points for travel as a student.

The student days are an ideal time to start dabbling with Miles & Points, allowing you to take some memorable trips and also build a very strong credit profile early on in your life. If you’re a student (or if you’re a parent of a student looking to set them up for a lifetime of points-funded travels), I’d pay close attention to Andrew’s advice, since he’s an incredibly advanced practitioner for his age. 

After Andrew’s article, I’ll also follow up with some of my own experiences from back when I was student, which was when I first got started with Miles & Points myself. 

With September just around the corner, students across the country are beginning to get ready for the new school year. For those moving out on their own for the first time, financials – and particularly credit cards – are a common point of discussion. 

Applying for a credit card can be an overwhelming decision at first glance, with so many different cards available out there, each offering a different reward scheme. For many, this will be the first card they ever get, so you might not score a big welcome bonus or a great rewards program at first, but this could serve as the starting point for an amazing credit card rewards strategy down the road.

Let’s lay out the basics of the credit card game, an optimal strategy, and some tips I’ve learned along my journey.

How Your Credit Score Works

Individuals who are credit-savvy can probably skip this reading (does this feel like university yet?), but there are some good basics that everyone should grasp. With credit cards, it’s always a best practice to pay off the card balance in full each month to avoid paying any interest charges. For a given billing period of ~30 days, a statement will be issued a few days after the period closes, with the amount spent during the billing period being due 21 days later. Paying your cards in full and on time is the single most important thing to do. 

With a new credit file as a student, it’ll be important to be mindful of a few things on your credit report. As I mentioned, your payment history is the most important factor, followed by your card balance relative to your credit limits (this is known as utilization), how long the account has been open, and then the number of credit inquiries on your file. 

Some good additional reading on this topic can be found in this article on credit scores, and you can sign up for a service like Credit Karma to monitor your credit health for free.

Financial issuers will be hesitant to offer top-tier credit cards to someone with limited credit history, partially due to the higher credit limits required, as well as the lack of any information on you (and no, your friend vouching that you’ll pay them back for lunch doesn’t count). Starting off with a basic credit card designed for students is a more realistic idea, and will help to build a relationship and history with the bank.

Now that we’ve briefly reviewed credit scores and digested some important reminders, we can move on to the strategies I’ve implemented successfully as a current student.

Credit Card Strategy

Each of the Big 5 banks (BMO, CIBC, RBC, Scotiabank and TD) all offer credit cards specifically for students. Most will have no annual fee (which is a good thing when you’re starting out) and some kind of rewards program. These rewards are commonly either cash back (~1%) or points, either from the bank themselves or a partner such as Aeroplan, Air Miles, or Scene. 

While cash back can be ho-hum at 1%, it’s better than using your debit card and getting 0% back, and can be a very straightforward option for people looking for simplicity. However, Miles & Points enthusiasts would definitely prefer to earn points instead due to the ability to redeem for greater value. 

When choosing your first credit card, you’ll want to look for something that you can keep open long-term, a rewards program that suits you, and an issuer that you can leverage your relationship with. Another thing to look for is rewards programs where the points can be earned through other avenues (such as Aeroplan miles or Air Miles), since you’d have more options when it comes to earning miles as well as keeping the points alive if you closed the credit card.

There are a few very good options to consider for your first credit card, such as the BMO Air Miles MasterCard, which offers a generous 800 Air Miles upon spending $1,000 within the first three months. The card has no annual fee, which makes it an excellent starter card. 

CIBC offers the CIBC AeroPlatinum Visa Card for Students, which comes with 5,000 Aeroplan miles with no minimum spend. The card has an annual fee of $39, which is manageable for those wanting to collect Aeroplan miles from Day 1.

My personal favourite first credit card is the Signature RBC Rewards Visa, which offers no welcome bonus but earns 1 RBC Rewards point per dollar spent on all purchases.

These points can be converted to RBC Avion points by doing a product switch, and then you can convert those Avion points into airline miles such as British Airways Avios, Cathay Pacific Asia Miles, WestJet Dollars, or American Airlines AAdvantage miles. Best of all, the card’s $39 annual fee can be waived with a student banking package. 

This card definitely provides a great deal of flexibility for individuals starting out, since it earns you a highly flexible points currency while also helps you build a relationship with RBC. This can pay dividends later on when trying to apply for one of the other RBC cards like the RBC Visa Infinite Avion or the WestJet RBC World Elite Mastercard.

Now let’s talk about American Express. Amex typically requires some established credit history (typically 9–12 months) before they’ll approve you for one of their cards; however, people have been approved with as little as six months of credit history.

It’s generally best to start with an introductory personal card like the American Express Cobalt Card or the American Express Gold Rewards Card – both of these can be great options for those looking to dive into more serious rewards.

American Express is known for giving out generous credit limits, but those are usually closely tied to income. Students can expect a small but reasonable limit from American Express, which has the potential to be increased after a few months of history.

Finally, MBNA is one more issuer that’s worth looking at. Generally speaking, they have a “weird” credit approval process where some individuals with perfect credit will be rejected, while students will have no issues getting approved. Students have been able to get the highly valuable MBNA Alaska Airlines MasterCard in the past; however, MBNA will likely require you to go through some form of address verification before approving someone with a new credit report.

Tips and Tricks for Students

There are a couple of student-specific tips (which may also be applicable to others) that I’ve picked up over the last couple of years. I’ll share them below and hopefully they’ll be helpful for other students trying to raise their game. 

No FX Fee Card

For students who want to travel internationally (or like to shop online), it can make a lot of sense to choose a No FX Fee card as one of your first credit cards. This card will likely be a card that you keep open for the long term (since you’ll always want access to No FX Fees), with occasional usage on foreign purchases. This will strengthen your Average Age of Accounts (AAoA) and credit utilization on this account, contributing to the overall strength of your credit file.

Rogers Bank could be a good issuer to start with, since they have a couple of different card options with No FX Fees (like the Rogers Platinum MasterCard), and their income requirements are relatively loose. They’re also fairly consistent with credit limit increases, offering me automatic increases every nine months or so.

Getting Approved on Lower Income

It’s always best not to lie about your income on credit card applications. While qualifying for World Elite or Visa Infinite cards might seem great, things won’t be as peachy during a financial review. Instead, I would stick to declaring your actual personal income on applications (the amount listed on your NOA) and then declare your household income based on your living situation.

As an example, I live with my parents and my brother in a house. When asked for household income, I declare the income of everyone in my house – so that includes my parents, my brother, and myself. Statistics Canada and the other government agencies all define us as a household, which is why I’d declare our total income as a household. 

On the other hand, if an issuer asks for my income plus my spouse or common-law partner’s income, then I’d only declare my personal income. 

For those living in residence or roommates, your situation may vary a bit since you don’t have a traditional household – you may have to think a little creatively here! 

It’s a good idea to apply for credit cards when you’re working, either part-time or while doing a summer internship (Prince of Travel maybe?) Being able to report you’re employed at XYZ Company definitely helps with getting approvals, rather than having to list your employment status as “Student”. You should also ensure your employment income shows up on your NOA, in case anyone wants to see your annual income numbers. 

In addition, product switching and credit limit movement will definitely be one of your best friends in terms of getting welcome bonuses on a limited student’s income.

Product switching can unlock bonuses without any application for additional credit, which can be a major plus. Likewise, moving credit around can help you get approved for cards even though an issuer might not want to offer you additional credit (MBNA is the prime example of an issuer that is friendly to this). 

Issuer-Specific Rules

As I’ve mentioned before, some issuers have specific rules for younger individuals. MBNA will require address verification for individuals with less than two years of credit history. It’s a fairly painless process, which simply involves receiving a letter from Canada Post that requires ID to pick up. 

A credit analyst at RBC once told me that premium cards (Visa Infinite or World Elite) cards won’t be auto-approved until after two years of credit history. True to his word, I began to receive instant approvals from RBC after I turned 20. This is definitely a case where product switching and building a relationship with an issuer can make a huge difference when it comes to getting a specific card.

Tuition Payments

Finally, your semi-annual tuition payments can be a great way to hit minimum spends. Ricky has covered Plastiq before, but using Plastiq to pay your tuition can definitely help reach the more onerous minimum spending requirements. The 2.5% processing fee (which can be lower under a promotion or if you’ve racked up the Fee-Free Dollars from referring your friends) is a small price to pay for a big welcome bonus. 

Meanwhile, my university takes Visa and MasterCard directly at a cost of 1.75%. It’s definitely worth the time to look up whether your university takes credit cards directly and the cost associated with their service. In my case, it’s more economical to use the school directly if I wanted to reach a minimum spend on a Visa or MasterCard than to go through Plastiq.

With that, I’d like to wish all my fellow students going to school a safe, educational, and enjoyable year ahead! With your newfound knowledge, you’ll hopefully be a credit card expert for your own wallet and your friends. Maybe they’ll even throw a referral or two your way… 

Andrew is a great example of someone who’s making the most of the tools at their disposal as a student to maximize his credit card rewards. 

If you’ve read about my Miles & Points journey, you’ll know that I had started out collecting points properly around 2015, which was my third year of university. At the time, I too relied on several tricks that Andrew has shared above, such as reporting my household income under a rather convenient definition of “household”, as well as applying for credit cards during summer internships when I actually had some form of income to report.

This allowed me to grab some of the higher-value credit cards, like the TD Aeroplan Visa Infinite, in my earlier days. Of course, the cards with the highest signup bonuses are generally issued by American Express, which has no minimum income requirements, so those were very much in play for me as well.

Finally, one thing I will add is that being a student gives you a huge amount of flexibility and spare time to actually redeem your miles for some amazing trips. I didn’t redeem my points for my first big trip until I was a year out of university, but I think back to all those summer holidays, winter breaks, and reading weeks that I had when I could’ve easily slotted in a round-the-world trip or two, knowing what I know now. 

Miles & Points is just one of those things, isn’t it – don’t we all wish we had gotten started earlier?  

Conclusion

Students are in a unique position when it comes to maximizing credit card rewards and using them to travel the world. It’s an ideal time in your life to get a handle on the basics of credit, and to get a head start on fulfilling your travel goals while you’re still young. Nevertheless, there are specific challenges associated with getting approved for credit cards with a thin credit file and with limited income, I hope that Andrew’s insight has been helpful for any students out there looking to take their game to a more advanced level.