The Neu Card is a new option on the market that eliminates some credit-building obstacles for students since it doesn’t require a credit history or an upfront security deposit. The fintech company behind the credit card, Neu, and the issuer, Cross River Bank, launched the card in October 2023.
The Neu Card follows a subscription-based model of $4 or $7 per month ($48 or $84 annually) and it doesn’t charge interest or any other fees. The cost may seem low for a student budget, but for most students better options for building credit exist, without a monthly fee. If you’re an international student with limited options because you lack a Social Security number, the Neu Card can be worth considering. With a valid Visa stamp that has six months until it expires, you can potentially qualify.
Here’s what you need to know about the Neu Card.
🤓Nerdy Tip
Your credit journey may look different depending on whether you start with a credit card by a fintech startup or a more established issuer like a big bank. Cards by startup financial technology companies are prone to significant changes as those companies continue to scale and compete to stay in the market. It’s important to keep this in mind as you select a starter card.
1. Higher subscription fee = higher credit limit
Depending on the information provided in the application, you’ll be approved for the $4 monthly plan with a $200 credit limit or get the option to choose the $7 monthly plan with a minimum credit limit of $350. With the latter, your credit limit can grow over time, up to $1,000, by frequently paying on time, spending amounts that demonstrate a need for a higher credit limit and gradually improving your credit score, said Abhishek Agarwal, CEO and co-founder of Neu, in an email. Your credit history (if its available), income and expenses are factors that determine the credit limit.
If you can qualify, it’s possible to avoid monthly costs, interest and fees with cards like the Chime Secured Credit Builder Visa® Credit Card and Varo Believe Secured Credit Card. These cards require a Social Security number, but they don’t require a traditional security deposit. Instead, you’re required to open a bank account with the issuer in the amount you choose to secure the card, and this amount determines the credit limit.
See more information from Chime
🤓Nerdy Tip
Avoid spending for the sake of earning a higher credit limit. Interest or fees outside of the plan’s monthly cost won’t apply, but unnecessary spending could derail your budget.
2. All purchases earn cash back
As a cardholder, you’ll earn 1.25% back on all purchases. With the Neu Card, you don’t have to worry about keeping track of redemptions or meeting a minimum requirement to cash in on rewards. Cash back automatically redeems as a statement credit toward your outstanding balance, according to Agarwal. You’ll still have to keep up with payments, though. Using rewards toward your balance doesn’t eliminate that responsibility.
While you might be tempted to use your credit card for all purchases to snag those rewards, try not to use more than 30% of your available credit limit so as to avoid hurting your credit score. For example, if you have a credit limit of $200, try not to carry a balance of more than $60. With a credit limit of $350, aim to spend no more than $105.
🤓Nerdy Tip
Credit utilization is a key factor that impacts credit scores. Paying down your balance before your statement closes can help, too.
A rate of 1.25% in cash back is a decent incentive on a student credit card, but you would have to spend $320 per month to offset the cost of the $4 monthly plan. With expenses like books and food it would be easy to do, but that low $200 credit limit will require you to break up those purchases and make several payments to be made whole. With the $7 plan, the process may be simpler if you have a higher credit limit. The amount spent would need to be $560 per month to make up the cost. It’s not worth overspending to save on the monthly fee, but if it’s spending you’ve budgeted for, the rewards can chip away at that expense.
Other credit cards can offer elevated rewards in specific categories. For instance, you can consider the $0-annual-fee Capital One SavorOne Student Cash Rewards Credit Card, which earns 3% cash back on dining, entertainment, popular streaming services and purchases at grocery stores. All other purchases earn 1%. There’s also a modest sign up offer: Earn $50 when you spend $100 in the first three months. The card is available to applicants with a limited credit history and no credit history, according to a spokesperson for the company. Terms apply (see rates and fees).
Without a credit history, you can consider the $0-annual-fee Discover it® Student Chrome which earns 2% cash back at gas stations and restaurants on up to $1,000 in combined purchases per quarter and 1% back on all other purchases. There’s also an incentive for new cardholders. INTRO OFFER: Unlimited Cashback Match – only from Discover. Discover will automatically match all the cash back you’ve earned at the end of your first year! So you could turn $50 cash back into $100. Or turn $100 into $200. There’s no minimum spending or maximum rewards. Just a dollar-for-dollar match.
Both options require a Social Security number as part of the application process.
3. Credit building opportunities are slim
The Neu Card doesn’t offer a path to upgrade to a traditional credit card that can offer better rewards or a higher credit limit. Some secured credit cards offer this option. It also doesn’t report payments to all three major credit bureaus, which is important when you’re establishing credit. As of November 2023 it only reports payments to TransUnion, said Agarwal. Cards that don’t report to all bureaus are limited in helping to build credit.
With the monthly fee, it’s not an easy card to keep open over a long term. Cards like the Discover it® Student Chrome and Capital One SavorOne Student Cash Rewards Credit Card graduate with you and they report payments to all three major credit bureaus. With Discover, you’ll have to notify the issuer that you’ve graduated to lose the “student” label on your credit card, and you’ll continue to earn the same rewards. With Capital One, this step isn’t necessary. The physical card itself doesn’t have a student label, and you can continue to use it in the same manner after you graduate. For either card, you might be considered for a higher credit limit if you can qualify with the income from a new job.
4. It doesn’t equip you to manage a real credit card
The Neu Card can help you get in the habit of managing a payment schedule, but it won’t prepare you to avoid the interest or fees that come with a traditional credit card. Think of it this way: If a regular credit card is a bike, the Neu Card is the training wheels, padding and danger-free carless zone that protects you from getting a scratch. The Neu Card could give you a false sense of confidence when it comes to managing a traditional credit card, just like those training wheels and padding could give you the confidence to take your bike on the open road with cars whizzing by and random objects in the path. You might not be as prepared to swerve as anticipated.
To its credit, the Neu Card allows you to carry a balance from one month to the next. That’s not the case with most no-interest, no-fee alternative credit cards. The Neu Card doesn’t require you to pay off the balance in full every month. There is a minimum monthly payment due each billing cycle. In this way, it keeps up with traditional credit cards, but paying the minimum will not train you to avoid the interest charges that typically apply when carrying a balance.
After starting out with a card like the Neu Card or any no-fee, no-interest option, take time to research how traditional credit cards work once you’re ready to branch out. This can prevent some hiccups.
5. You can talk to a live customer service representative
When an established issuer like a big bank offers student credit cards or starter cards, you don’t generally have to worry about having the ability to connect with a real person. That’s not always the case with non-traditional credit cards. But the Neu Card offers a way to reach a live agent by phone or email during weekdays. While picking up the phone may not always be a preference, it can be what you need when a chatbot or automated email response can’t address questions or resolve an issue.
