5 things recent graduates need to know about credit cards – Forbes Advisor
So you’ve graduated from college this year and it’s time to step out into the world as an adult. Congratulations!
Now is the time to start thinking about your finances and how you are going to manage them. Credit cards, when used responsibly, can be a great way to simplify your spending and budget. Using them regularly and paying your bills on time will also help boost your credit score high enough that you get great rates for auto or home loans as you move into the next phase of life. And best of all, you can earn rewards on every purchase you make, which can put some cash back in your pocket or help you take your dream vacation.
Before you get carried away, there are a few things you need to understand about credit cards. Here’s a guide to get you started.
What is your credit situation like?
In an ideal world, you’ve already started building your high school credit history with an authorized user card on a parent’s account. Then you switched to your own credit card while you were in college. Now that you have graduated you have a job in sight and will have a regular income and are already making on-time payments on your student loans.
With that in mind, we’ll start by looking at some cards that would be good for a new grad who has a stable job and has already established at least a minimal credit history.
Of course, we know that not always everything turns out ideal. Maybe you haven’t already started paying attention to build your credit score. Maybe you are still looking for the perfect job and haven’t found a full-time job yet.
Don’t worry, there are still some credit card options available for you too. We’ll talk about how you can build your credit with a little help from others, and we’ll also talk about how you can get started and improve your score if you’d rather do it on your own.
Beginner Credit Cards
Let’s start by assuming that you may have had an authorized user card for a few years, then while in college you switched to your first card, maybe one. student credit card. You paid your bills on time, but you don’t have a very long credit history. Now that you’ve graduated, you’re ready to get your first full-fledged credit card.
This type of scenario is very common and banks have a whole bunch of entry level credit cards for people like you. They’re easier to get approved if you have a good, but not yet great, credit score, and some have benefits that can be helpful.
The mix of perks, fees, and issuing banks can be a bit overwhelming if you’re just starting out on your own, so we’ve put together a list of a few cards that might be right for you.
More rewarding credit card options
If you have been working on your credit history for several years now. You might be ready for one of the most rewarding credit cards out there. It will be much easier to get approved for any of these cards if you have a strong credit history, a credit rating in the good to excellent range, and a steady job now that you’re out of school.
This next level of cards often comes with a welcome bonus, a rewards program, and many other perks. There is a wide range of annual fees and benefits available, so we’ve rounded up some of the more notable options below. Pick the one that offers the most benefits that suit your needs and start reaping the rewards that come with managing your credit well.
Capital One® Savour® Rewards information was independently collected by Forbes Advisor. Details have not been reviewed or provided by the card issuer.
Secured credit cards
Another option, if you haven’t taken steps to establish your credit history yet, is to get a secured credit card.
Secured credit cards can be a great option for people with little or no credit history because they are much easier to obtain than traditional unsecured credit cards. You don’t need to show proof of income, you don’t need to have had any cards in the past, and in some cases you don’t even need to have a credit score at all. .
The reason it’s easier to get approved for a secure credit card is that you actually need to provide a deposit to get the card. Typically, the amount of your deposit will be your credit limit. In effect, you are asking the bank to hold your money and lend it to you in order to build up your credit history.
Some secured cards will increase your credit limit over time, some will allow you to switch to an unsecured credit card after you demonstrate your creditworthiness, and others will simply maintain your limit for the life of your card. The best secure cards have reasonable deposits and low fees. Below are a few options to consider.
BankAmericard® Secure Credit Card information was collected independently by Forbes Advisor. Card details on this page have not been reviewed or provided by the card issuer.
If you can’t get approval, get help from others
On the flip side, if you haven’t used your time in high school (with the help of your parents) and college to develop your credit profile and boost your credit score, it’s not too late. You might not qualify for the credit cards we talked about above, but you can still enlist the help of a relative or friend and start getting your credit score back on track. .
There are two ways a loved one can help you with your credit, but it’s important that you and the other person fully understand what the process involves. In both cases that we are going to describe, the other person is ultimately responsible for any balance you accumulate on your card. Do not use any of these options if there is no one who feels comfortable in this type of financial relationship with you.
Obtain an authorized user card
Virtually all standard credit card accounts allow the cardholder to designate at least one, and often multiple, authorized users for the account. The Authorized User will be issued a credit card in their name and can use it to make purchases as if it were their own card.
The main difference between having your own credit card and having an authorized user card on someone else’s account is that when you are an authorized user you are part of the master account. The primary cardholder is ultimately responsible for everything you load on your card. You don’t have to worry about being approved for the card on your own and with many banks, the authorized user card will show up on your credit report and help you start building a score.
Some parents will get authorized user cards for their children on one or more of their credit card accounts. This is usually done when the kids are teens in high school or even college. If you don’t already have an authorized user card, you can still ask your parents, another close relative, or a friend to add you to one of their accounts. It’s never too late to start building up credit.
Have someone co-sign your card
What if you’re ready to open your own credit card account, but don’t have a high enough credit score or don’t have a stable income? Another way to get approval is to have the card application co-signed by someone you trust.
By doing this, you are relying on the other person’s good credit history to get your approval. When they co-sign your account, the bank knows they’re prepared to be responsible for your credit card balance should something go wrong, and they’ll be much more likely to approve you.
Again, like being an authorized user on someone else’s account, having someone co-sign your credit card account places the ultimate financial burden on them. You should only do this with someone who you are comfortable having this type of financial relationship with and who is comfortable knowing that you will be paying your bills.
Many issuers don’t allow co-signers on credit card accounts, but if you have a relationship with a small bank or credit union, this may be an option.
As you leave college and move on with whatever life throws at you, now is a great time to make sure your finances are on the right track and that you are responsible for your credit.
Whether you’ve managed to build your credit history and are ready for your own new credit cards or still need a little help getting your credit score where it needs to be, this guide should give you a good idea of what your next credit card options are.
Use your credit cards responsibly, making regular withdrawals and paying the bill on time, and you’ll soon see your credit score start to rise. Then, when you’re ready to get a car loan, home loan, or small business loan to move forward, your high credit score will be waiting for you to make sure you get the best possible rates.
To view the rates and fees for the American Express® Gold card, please visit this page.
To consult the rates and costs of the American Express Blue Cash Preferred® Card, please visit this page.