College graduation is an exciting, joyous and yet terrifying time of new beginnings.
The new graduate is about to begin life in the “real world,” outside the cocoon of the college campus. (Of course, many new grads temporarily head back to mom and dad’s house before taking that final step into the real world, but that’s not what I’m talking about here.) It’s a world of job interviews, resumes and meetings over coffee. It’s a world in which your experience matters far more than your grades, especially once you’ve gotten your first full-time job.
There is one grade that still matters a lot, however — your credit score — and most college graduates paid little or no attention to it during school. That’s why one of the most important moves new college graduates can make is to get a credit card.
[See: Best Credit Cards | Find the Right Card for You.]
Now, that doesn’t mean you need to go crazy spending on that card. You barely even need to use it at all. Just having it, making occasional small purchases with it and paying the bills on time every month will put you on the path to good credit for the rest of your life. And why does that matter? People with good credit get the best rates on credit cards, mortgages and car loans. They get the best rewards and the lowest fees. They’re the most likely to be given a break when they make a mistake, such as being late with a payment. In short, good credit can save you big, big bucks over your lifetime — thousands and thousands of dollars.
A credit card isn’t the only way to get started with credit, but it is one of the easiest and most available routes for college graduates. Just make sure to temper your expectations — no, you won’t be getting that 50,000-mile sign-up bonus with your first card — and remember that your first card is just a stepping stone. Handle it wisely and it won’t be long until you can trade up to one with better terms and rewards.
Here are some of the best cards available for new college graduates.
Discover It Secured Credit Card
Don’t be put off by the fact that this is a secured card — in other words, a card that requires you to put a security deposit down before you can get it. This card will do most everything that a regular, non-secured credit card can do for you.
Help you build your credit? Yep. Your history will be reported to the credit bureaus.
Give you rewards? Check. Two percent back at restaurants and gas stations, plus 1 percent elsewhere. Discover even matches the cash back that you earn at the end of the first year. (Don’t expect to get rich, though. Secured cards typically have very low credit limits.)
Free FICO score? No annual fee? Yes and yes.
Higher-than-average APR? Unfortunately, at 23.24 percent, the answer is yes to this as well. That’s just a reality with starter cards. Even so, this card can be a great first choice for someone who is just beginning to build credit. Why? It minimizes risk. There’s very little risk for the bank because of the security deposit. There’s reduced risk for you, too, because the small credit limit means you won’t be tempted to go on a shopping spree with the card. And there’s limited risk for mom and dad because they don’t have to co-sign for the card and the most money they could lose is the amount of the security deposit.
Lastly, after 12 months, Discover will review the account each month to see if you qualify to get your security deposit back. That means if you use the card wisely, your secured card could turn into a regular, unsecured card in just over a year.
[See: 12 Ways to Be a More Mindful Spender.]
Journey Student Rewards From Capital One
If you’d prefer not to go the secured-card route, this card may be a good option for you.
It comes with 1 percent cash back on all purchases, but if you pay your bill on time each month, Capital One will boost the cash back to 1.25 percent. There are no limits as too how much cash back you can earn.
There’s no annual fee and no foreign transaction fees, either. In addition, Capital One promises to increase your credit limit if you make your first five monthly payments on time. Assuming you can resist the temptation of spending all that new credit, the higher limit is a good thing for your credit score. That’s because your credit utilization rate — your balance compared to your available credit — is a key factor in your credit score. Say you have a $1,000 balance on a card with a $2,000 limit. That puts your utilization rate at 50 percent, a high number that will hurt your credit. Bump that limit up to $4,000 and things change. Your utilization becomes a far more impressive 25 percent, and your credit score will likely get a bump because of it.
[See: 12 Simple Ways to Raise Your Credit Score.]
Citi Double Cash
For graduates who did spend time in college building up their credit, the Citi Double Cash card can be an excellent choice.
It promises 1 percent cash back on all purchases and then an additional 1 percent back when you pay for those purchases. That basically makes this card a simple 2 percent cash back card, and that’s hard to beat.
There are no caps on how much cash back you can earn. There are no rotating cash-back bonus categories to keep up with. There’s no annual fee. It even comes with an APR as low as 13.24 percent, though recent grads should probably expect an APR closer to the high end of the card’s APR range — 23.24 percent. Add it all up and you have a “set it and forget it card” that gives you a nice cash-back return without making you work too hard for it.
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3 Great Credit Cards for College Grads originally appeared on usnews.com
