Best Credit Cards for New College Graduates & Young Professionals
May 14, 2008
The best credit card for you will likely change along with your financial circumstances. As you graduate from college and get a job, you’ll want to do a review of your finances and your current credit cards to make sure you’re taking advantage of the benefits your new salary might bring.
Many people unfortunately rely heavily on credit in school because they don’t have much money coming in. However, once you graduate and find a job you’ll finally have a regular income. Not only will this allow you to start paying off the debt you might have accumulated during your college years, it may also mean you’re eligible for cards with better features. Here are some tips to follow as you search for the best credit card for a new college graduate.
Tip 1: Upgrade your Credit Card
If you have a student credit card, chances are the interest charged on unpaid balances is higher than it needs to be. In order to offset the higher risk of students defaulting on credit card debt, student cards tend to have higher rates and lower credit lines.
If you were able to establish good credit while in school here are some of the best credit cards for you:
Blue from American Express
Blue from American Express has an introductory period of 0% interest for purchases. You can’t get a rate any lower than zero and after the introductory period is over the rate is still one of the lowest around for credit cards.
The Blue card does offer a rewards option through the Membership Rewards Express program. You could instead opt for the Blue Cash card if you have an excellent credit history. Blue Cash can pay up to 6% cash back if you have the preferred version. Both the Blue Cash Everyday and Preferred give you higher cashback at supermarkets, gas stations, and supermarkets. The Everyday card has no annual fee but pays a lower cash rebate, the Blue Cash Preferred does have an annual fee but pays 6% cash back on groceries and 3% back on gas and department stores.
Although student lines of credit are excellent to have during school to help to establish a credit history, now that you have a salary coming in, you’re likely eligible for a new card that offers more benefits. Things to look for are a lower interest rate and a rewards program. Of course the quality of card you’re eligible for will depend on your credit score.
Tip 2: Don’t Close Your Student Line of Credit
Many people make the mistake of closing their student line of credit because they have a better line of credit opened. Ironically, this is a move that could actually cause your credit score to drop. The problem is that lenders look for long term credit history on your credit report since a credit history helps establish your ability to repay on time and makes companies more willing to extend you credit.
You can check your current report for free once a year with AnnualCreditReport.com. You can also check out your FICO score in addition to your credit report at places like myFICO and GoFreeCredit. There is a fee for the service but they do offer a free trial.
Tip 3: Watch Out For Balance Transfers
With your lower interest rate on a new credit card, you may be tempted to move your existing student credit card balance to a new line. This may not be a bad idea but watch out for the high balance transfer fees often in place. You also want to look for a card that offers a low APR on balance transfers (even a 0 percent APR) so you save money.
How you could take advantage of this is to move your balance on an existing student card over to the Discover card when you signup. You’d have 12 months of no interest payments so the money you paid each month would go toward paying down the balance instead of towards interest.
Tip 4: Use Credit Responsibly
Now that you have a better credit card in your hand use it wisely. Don’t create more debt for yourself with irresponsible spending. As a new college graduate, you are likely looking for a home, furnishings, a car, or even to start your own business. You’ll have plenty of opportunity to spend money, if you charge things on your card make sure you have the cash to cover them. Pay off your credit card each month to continue to build a credit history and to avoid interest charges.
If you haven’t had a chance to build your credit history yet or have bad credit there are a few options for you. The downside is that you’ll have to pay an annual fee due to your bad credit. The upside is you may still qualify for a credit card and if use it wisely you can rebuild your credit.
Tip 5: Research Your Credit Card Options
There are many different cards available with a wide array of different card features. Make sure you research your options before applying for a new card. You can call up your current card provider, explain your situation, and ask what cards you’re eligible for now that you have a regular income.
There are many sites online that you can use to review and compare different credit cards. Some of the things to look for are:
- Low APR on purchases
- Low APR on balance transfers
- Low Balance transfer fees
- No Annual fees
- Cash Back options
- Travel rewards
- Gas rewards
- High Rewards earning limits
- 0% APR deals on card purchases and balance transfers
College Graduate Finance Guide
This article wraps up the personal finance tips for college graduate series. Here is a summary of all the financial topics we covered:
- Investing for College Graduates
- Health Insurance for College Graduates
- Student Loan Tips
- Spending & Budgeting for College Graduates
All posts by Ben Edwards