Now that you’re out in the “real world,” it’s (unfortunately) time to start thinking about your financial future.
While mobile payments are filling the gaps between debit cards and credit cards, college students shouldn’t be ready to forego credit cards entirely. Studies show that 57% of college students currently use credit cards. And, sure, that’s great in terms of avoiding the temptation of charging massive purchases that you won’t be able to pay off later.
However, credit cards are actually pretty beneficial for college students and recent grads. Not only can they offer you some pretty great perks (cashback, discounts, and points for spending on things you love), but they’re a crucial component of building your credit.
Now that you’re out in the “real world,” it’s (unfortunately) time to start thinking about your financial future. If you’re a recent grad, here’s what to know about credit and the best starter credit card for you.
Is Building Credit Really That Important?
Wow, yes, absolutely! We can’t stress that enough. While it might not seem like it right now, building credit is crucial to your financial future (which, just so happens to affect how the rest of your life plays out, including your personal life). You need credit in order to apply for loans, which is something you’ll likely do if you’re planning on purchasing a home in the future, need an auto loan, or simply want to apply for more credit cards in order to enjoy their perks.
While various things affect your credit score, the length of your credit history is one of the biggest. That’s why it’s so important to begin building credit when you’re young. The idea is to open accounts while you’re young and be responsible about how you pay them back so that when you’re ready to apply for that massive mortgage loan in a few years, you’ve been building a credit history that makes you eligible for the type of loan you want.
The Best Starter Credit Card for Young Adults
Depending on your financial situation, you’ll find that not every credit card is the best starter credit card for you. So, we’re giving you a few to choose from. As a recent grad, it’s not likely that you’ll qualify for student credit cards anymore (yet another one of the perks you lose out on after graduation, so be sure to soak it all up while you can!).
Discover offers some great starter credit cards for students such as the Discover it Cash Back Student. However, if you’ve already graduated, you can take advantage of the same perks with the Discover it Cash Back card. With a $0 annual fee (an essential for any starter credit card), you’re able to earn up to 5% back on everyday purchases at places like Amazon.com, grocery stores, restaurants, and more. If you get denied for this card due to a lack of credit history, try starting with the Discover it Secured card. It requires a deposit, but it’s an easy way to build credit until you’re eligible for another card.
Capital One’s Platinum Credit Card is one of the best starter credit cards for recent grads because those with fairly limited credit history are still usually approved. If you have a limited credit history, your credit line might be low at first, but you’re able to build it over time. Plus, for those new to the whole credit card thing and find it hard to manage fees and spending, this card comes with no fees, including no annual fee, no foreign transaction fee, and no penalty APR.
Bank of America has quite a few great savings account options for student savers. However, if you’re a recent grad then we suggest taking advantage of the Bank of America Cash Rewards credit card. Aside from the $0 annual fee, you’re able to build your credit while enjoying a $200 cash rewards bonus after making at least $1,000 in purchases in the first 90 days (like rent, car payments, etc.). With 3% cashback in the category of your choice, it’s a great starter credit card for those who are building credit and in dire need of some extra cash money.
4. Any Secured Credit Card
Secured credit cards are a fantastic option for those with bad credit or no credit who keep getting denied for regular credit cards. They work exactly like regular credit cards. However, because you have no credit, you have to “secure” them with a small deposit (usually no more than $200). Over time, you’ll build credit and most companies will send you your deposit back and raise your credit limit. It’s a great option for recent grads and it doesn’t take long to get your credit score up high enough to apply for the bigger cards.
Still Unsure About Credit?
Credit is confusing. We totally get it. If you’re still unsure about what credit is, why it’s important, or what the heck APR even means, head on over to our glossary. We’ve got a whole host of helpful terms that’ll school you in credit to get you up and on your way to financial independence.
Interested in learning about other topics that they should have taught you in school? Check them out here.