Getting a credit card is a rite of passage for people who are just beginning their independent lives. It can be difficult to find the right credit card when you've never had this one before. In this article, we guide you towards finding the best credit cards for young adults. We will also help you understand how to get your first credit card, and the best ways to use it.
What Are the Best Credit Cards for Young Adults Starting Out?
The best credit card for you depends largely on your situation. For instance. a student living in a dorm will qualify for different credit cards from a young adult with an apartment and a full-time job. Someone who has already built up some credit will qualify for different cards from a person with bad credit or no credit. Here are a few of the best credit cards for young adults in different walks of life.
If you are enrolled in a college or university at least part time, and have a university-issued email address that ends with ".edu," you may qualify for the Discover It Student Chrome card. With this card, you'll get 2% cash back on the first $1,000 you spend at restaurants and gas stations each quarter, plus 1% cash back for all other purchases. You won't have to deal with any annual fees, and you'll have a 0% introductory APR on new purchases for the first six months.
This can help if you need to purchase text books and other school supplies, or decorations and housewares for your dorm. Something extra that makes this one of the best credit cards for young adults who are in school is that, if you end the school year with a 3.0 GPA or higher, they'll give you a $20 credit on your statement.
Bank of America
If you're a student who is going to college away from home, you might opt for the Bank of America® Travel Rewards Credit Card for Students instead. For every dollar you spend using this credit card, you'll earn 1.5 points. You can then cash in the points for flights, hotels, vacation packages, cruises, rental cars, or baggage fees. That makes this one of the best credit cards for young adults who want to go home for holidays and vacations, or perhaps do some traveling over spring break.
For Young Adults with Bad Credit
Let's say you made some poor choices with your credit when you were younger and your credit has already been crushed. Now you're a little older, more capable of making good choices, and you're ready to start building up your credit. One way to do this is with a secured credit card. You start off by paying a security deposit. This is different from a debit card, in which you use a card to pay with money that you already have in your bank account.
You will have a credit card bill each month, and the security deposit will not count towards the bill. It just protects the credit card company in case you don't pay your bill. Your credit limit will be the same as the amount you paid for your security deposit. One of the best credit cards for young adults with poor credit is the Discover It Secured Card.
Like other secured credit cards, you pay a security deposit. You will then get a bill each month which you'll need to pay, just like any other credit card. Unlike most other secured cards, Discover will give you 2% cash back at restaurants and gas stations and 1% cash back on all other purchases. If you pay your minimum balance for eight months, you may qualify for an unsecured credit card with Discover.
For Young Adults with Some Credit
If you have built up some credit already, even if your credit score is not quite stellar, you may qualify for the Capital One® Platinum Credit Card. While it doesn't have a lot of perks, such as cash back, it can be considered a first step up the ladder from a secured credit card. It has no annual fee, but it does have a higher than usual APR.
That means that if you can't pay your full balance, you'll be paying the company a lot of interest each month. On the plus side, if you do pay your bill regularly, you will increase your credit limit and possibly qualify for a card with a better APR. You'll also get some regular Capital One benefits, such as an extended warranty on your regular purchases, roadside assistance, rental car insurance coverage, and travel assistance.
For Young Adults with Good or Great Credit
Some young adults have already managed to build up a great credit score. If that describes you, then you'll probably have a multitude of credit card choices available to you. One of the best credit cards for young adults with great credit is the Discover it® - Cash Back card. You will get 5% cash back in two categories that will change every quarter. The categories might be restaurants, gas stations, grocery stores, etc. On all other purchases, you'll get 1% cash back.
For your first year, Discover will match the cash back you earned so that you'll end up with double the cash. This card also has no annual fees, over limit fees, or foreign transaction fees. As an added bonus, if you make a mistake and miss a payment or pay late, Discover will waive the late payment fee the first time.
Another option for those with good or great credit is the Capital One® Venture® Rewards card. This may be the best credit card for young adults who would prefer travel rewards over cash rewards. Instead of accumulating cash, you get travel miles. Spend $3,000 on your card within the first three months of opening the account and you'll get 50,000 bonus miles. For every dollar you spend, you'll get two miles.
Use your card on Hotels.com and you'll get ten miles per dollar. Then, when you're ready to travel, simply put the travel expenses on your credit card and use the miles when it's time to pay your bill. The miles are good for air fare, hotel reservations, cruise reservations, train tickets, taxi, bus or limo fare, travel agent fees, and time shares.
Keep in mind that you don't even have to literally be traveling out of town in order to use your miles. You can use them for a taxi fare to take you on a night out in your own city or enjoy a luxurious hotel stay only a few miles away from your home. You'll also get some perks such as rental car insurance, travel insurance, and purchase protection. You'll have no annual fee the first year, and no foreign transaction fees.
How Do You Get a First Credit Card with No Credit?
If you are a young adult who has never had a credit card before, you may find yourself with no credit at all. Having no credit can be no better than having bad credit, because credit card companies have no way of knowing what kind of credit user you'd be. To approve you for a credit card, they want to see that you have a history of making payments on time and using credit responsibly. There are a few ways you can work on building up your credit so that you can qualify for a credit card in the future. It may take a while, so you'll need to be patient.
Get a Secured Card
Applying for a secured card is one step you can take, as mentioned earlier in this article. With a secured card, you'll pay a security deposit that the company will hold on to. You use the credit card just like you'd use any other credit card, being sure to make all of your payments on time. Look for a card that reports to all three credit bureaus.
In the future, when other credit card companies check your credit, they'll see that you have a record of making your payments. Plus, if you get a secured card through a company that also offers unsecured cards, they may eventually offer you an unsecured credit card. It may take eight months to a year, or even longer, to qualify for an unsecured card; but you'll be building up your credit for the future. Discover, Capital One, Visa, Citi, and Mastercard all offer secured card options.
Get Help from Family
If you have parents, siblings or other family members who trust you, you may be able to ask them for help in building your credit. There are two ways they can help you. One way is for them to add you as a user to a credit card they already have. This means you'll be able to use their credit card, and the payments will be added to your credit report.
Some people may be reluctant to add a user to their credit card, but if you are a generally responsible young adult, and your family members know they can trust you, they may be willing to take the chance.
Alternatively, you could ask a family member to co-sign with you on a new credit card. This could increase your chance of getting approved for one of the best credit cards for young adults. As co-signers, you and your relative would both be responsible for paying the bill. This could hurt the other person's credit if you end up with a lot of debt you're unable to pay, so potential cosigners may want to give this option a lot of thought before committing to it.
Build Credit with Existing Accounts
This step will not allow you to get a credit card immediately, but it will help you to work towards getting one. Many young adults already pay some bills on a regular basis. If you have a bank account and you use it to pay for things like a phone bill, cable or wifi, or utilities, you can get credit for these by enrolling in a service such as Experian Boost or UltraFico.
Each month, these companies will scan your bank account records looking for on time payments. They'll only use on time payments and ignore late payments. The more on-time payments you have, the better your score will get. This will only affect your Experian score or your Fico score, but it can still be helpful for those who are trying to build up some credit in order to qualify for the best credit cards for young adults.
If you pay rent, you can also enroll in a rent credit monitoring service such as RentTrack. The purpose behind these services is to show credit card companies that you are a responsible person who pays their bills on time.
Get a Secured Loan
Another newer way to build up your credit is to get a secured loan or credit-builder loan. You apply for a loan from the company, but they hold on to the money instead of giving it to you. Then you make regular payments on the loan for anywhere from one to two years. The company reports your payments to credit bureaus. When your loan is paid in full, the money is released to you. This may seem detrimental, because you are making payments on a loan you will not actually have. However, if you need a way to build up your credit, this is an option.
Tips for Young Adults with Their First Credit Cards
Whether you have managed to qualify on your own for one of the best credit cards for young adults or your family members are vouching for you as a co-signer or authorized user, it is now important to use your credit card responsibly. Here are some tips to help you be a successful credit card user.
Don't think of a credit card as free money that you can use to buy whatever you want. Remember that using the credit card just means you will need to pay later. Using up more and more credit that you will never be able to pay off will get you into trouble later. For people just starting off with their first credit cards, it is a good idea to use your card to buy small, everyday things rather than using it to make extravagant purchases.
Make Regular Payments
Focus on making on time payments. It is best to pay your credit card bill in full whenever possible rather than making just the minimum required payment. This is easier to do if you've been using your card to make small purchases that fit into your existing monthly budget, rather than large purchases that will take longer to pay off.
Stay within 30% of Your Credit Limit
Avoid using more than 30% of your credit limit at once. If you have a credit limit of $1,000, for example you should strive to never have more than $300 in debt at once. This can take a lot of self-discipline as you begin to qualify for higher credit limits. However, it can protect your credit score for the future.
Getting your first credit card is an exciting moment for a young adult. Remember to do your research to find the best credit card for young adults in your situation. When you do get a credit card, use it responsibly. This way, you'll be able to enjoy all of the benefits and conveniences that having a credit card can give you.