But all credit cards aren’t created equal, as available offers have drastically different approval requirements, rates, rewards and fees. Complicating the matter is the fact that a recent graduate’s personal credit experience may range anywhere from zero to four years. A given individual’s card choice ends up being rather straightforward, however. It all comes down to determining which of the following groups you fit into:
Grads with Good Credit: If you’re leaving school with an unofficial minor in personal finance, after responsibly managing your credit for close to four years, you’re now ready to graduate to the market’s big leagues.
Grads with Active .EDU Email & Limited/No Credit: Student cards tend to offer better terms than a young person’s credit standing would ordinarily merit, due to their age and above-average earning potential. An active university email address and a clean credit record are all that’s required.
Grads with Inactive .EDU Email OR Credit Missteps: A secured credit card is the next best option if you can’t qualify for an offer targeted to students. Secured cards offer what amounts to guaranteed approval since the security deposit you will be required to place also acts as your spending limit, thereby protecting the issuer against a lack of repayment and preventing users from getting in over their heads.
We kept those guidelines in mind when comparing more than 1,000 credit card offers – irrespective of advertising status – in order to ultimately select the Best Credit Cards for 2015 Graduates, however established their credit standing may be.
Grads with Good Credit
(Rewards) – Offers 1.5% cash back across all purchases in addition to a $100 initial bonus for spending $500 in the first three months. You also get 0% on new purchases until February 2017 (13.24% - 23.24% variable thereafter). There is no annual fee.
(Financing) – One of the best cards on the market, this so-called free balance transfer offer gives qualified applicants a 15-month 0% introductory interest rate on transferred debt as well as new purchases. It charges neither an annual fee nor a balance transfer fee.
Grads with Active .EDU Email & Limited/No Credit
(Initial Bonus & 0% Financing) – Spending at least $500 during the first 90 days that you have this card will score you a $100 cash bonus. You’ll also get 3% cash back on gas and 2% on groceries (on the first $1,500 spent in those categories each quarter) in addition to 1% on everything else on an ongoing basis. This student credit card also gives users 0% financing on new purchases for the first 12 months their accounts are open, but it does have a 3% balance transfer fee that students with existing debt should be aware of. There is no annual fee.
(Cash Back) – This card is both lucrative and conducive to responsible money management. It offers 1% cash back across all purchases and 1.25% cash back in months that you pay your bill on time. This card does not charge an annual fee.
(Travel Rewards) – This student BankAmericard offers a 10,000-point initial bonus in return for spending $500 within the first 90 days as well as 1.5 points per $1 spent on travel. It has neither an annual fee nor a foreign transaction fee.
Grads with Inactive .EDU Email OR Credit Missteps
(Partially Secured: No Annual Fee) – This is a partially secured card, which means you can get a credit line in excess of your security deposit, depending on your credit standing and disposable income.
(Secured: No Annual Fee) – This secured card, which requires a minimum security deposit of $300, stands out because it does not charge an annual fee and offers rewards – albeit those catered to bikers.
(Unsecured: No Missteps) – This card stands out because it does not require a security deposit or established credit history for approval. As a result, if you have any red marks on your credit file, you should probably opt for a secured card instead. This card has no annual fee.
Ask The Experts: Money-Saving Tips For College Grads
- Gauge the Market: You need a basis for comparison when comparing credit card offers. Any offer viewed in a vacuum might as well be in another language. As a result, it’s always a good idea to check out our latest Credit Card Landscape prior to submitting an application. Here’s the current lay of the land as far as student cards are concerned:
- None of the college student card offers that we track have annual fees.
- The average 0% student card waives interest for nearly four months longer than the overall average 0% card.
- The average 0% student balance transfer card waives interest for nearly two months longer than the overall average 0% transfer card.
- Both cash back and mile/point-based student initial rewards bonuses are well below the overall market initial rewards bonus average, though.
- Only 19% of student credit cards lack foreign transaction fees. Students thus need to choose carefully when destined for an international spring break bonanza or overseas post-graduation backpacking trip.
- Get Your Priorities Straight: When it comes to prioritizing specific needs within these categories, your course of action will again be quite simple. For starters, cost-effective credit building should be a recent college graduate's top personal finance priority. You should therefore focus on cards that do not charge annual fees. Beyond that, look into rewards if you always pay your bill in full and 0% rates if you don’t – but remember these come after low fees on the card term totem pole.
- #SchoolSpirit: Most colleges and universities have a co-branded credit card program, often offered through the school’s alumni association. In addition to promoting engagement with the university (thus boosting donations), such offers may provide good value and should be compared to the best offers you can qualify for.
For example, the Howard University Credit Card offers a 15-month 0% introductory APR, while the Ohio University Card gives you 20% off your first purchase at campus stores, and both the University of Oregon and Oregon State University cards provide 5% off purchases at associated merchants, 2% on gas and groceries and a $50 statement credit for spending at least $1,000 in the first three months.
- Automate Everything: Considering young people’s innate forgetfulness and all that comes with starting a new chapter in life, it’s probably best not to rely on memory to meet important deadlines, such as due dates for monthly payments.
“Most graduating college students already have school loans,” says Richard A. Ferri, founder of the investment advisory firm Portfolio Solutions. “Adding credit card debt only makes things worse.”
Setting up automatic payments from a bank account will not only prevent your credit standing from taking a hit due to tardiness, but it will also help you avoid wasting money on interest and late fees. You can also set up alerts for when you’re approaching your credit limit in order to minimize credit utilization (and thereby expedite credit building).
“Spending money for something you really don't need can be a big waste of your money,” says Edna Grover-Bisker, director of career opportunities & employer relation at the Missouri University of Science and Technology. “But you can make the matter worse, a lot worse, by putting the purchase on a credit card and paying monthly interest charges.”
- Save & Invest: The Great Recession hit us so hard in part because too many of us were operating under the assumption that rosy economic times would persist. We didn’t give ourselves the type of financial safety net necessary to withstand a period of unemployment or cover emergency expenses without additional income.
You can effectively “recession-proof” your finances and set yourself up for an early retirement by setting aside at least 10% of your take home each month. Your goal should be to establish a rainy day fund with about a year’s worth of income, which you can tap in times of trouble. “As a young adult, it’s crucial to have at least a few thousand dollars in the bank to get you through the first few months after graduation,” says Andrew Josuweit, CEO of Student Loan Hero.
It’s also important to begin saving for retirement as early as possible, whether that means putting money into an IRA (which could be helpful come tax time) or contributing to an employer’s 401(k) plan (especially if there is a contribution matching plan in place). Not only will this remove the temptation to spend, but you’ll also benefit from years of compound interest. Your income might be limited early on, but don’t use that as an excuse to delay getting into good habits.
“The most common mistake that young people make with their money is not contributing enough to their employer’s retirement plan,” says George Papadopoulos, founder of Fee Only Wealth Management. “At the very least they should contribute enough to participate fully in the matching! If they can maximize their contributions and adjust their lifestyle accordingly and keep it up for several straight years, they will be way ahead than their peers to building wealth.”
- ABC: Always Build Credit: The importance of a solid credit score bears repeating, as it affects not only the credit card and loan terms for which you qualify, but also your insurance premiums, job prospects, and ability to find a place to live as well as a car to drive. The earlier you begin building credit, the more you’ll save over the course of your lifetime.
“Financial literacy in today’s world is almost as important as learning to read and write,” says - Jennifer Collet, president and CEO of the Missouri Council on Economic Education. “And one could argue that a student’s credit history is far more important to his or her future than grade point average.”
- Comparison Shop for Grad School: While attending college is clearly a wise financial move, being strategic about which school to attend, what to major in, and whether or not to pursue an advanced degree will help you maximize the return on your investment and minimize the burden of student loan debt. The average graduate owed more than $27,000 in 2013, and our collective student loan debt now exceeds $1 trillion. The best approach is to compare cost disparities among different institutions, majors, and advanced degrees to the employment rates and average salaries of alumni.
“When finance is ignored in life decisions, young people lose out big time on future opportunities,” says Peter Bielagus, founder of Wealth Educators International. “The student who falls in love with a college because it has a cool campus and a new $80 million dollar fitness center, but borrows through the nose to go there, sets their life on a very limiting path.”
- Benjamin Button Money: It’s all about building that old money, no matter how young you are. So, try as best you can to channel your youthful exuberance and tolerance for risk into entrepreneurial endeavors and self-improvement rather than wasteful spending.
In addition, remember that youth is one of the best assets you have when it comes to retirement planning because you can establish quite the nest egg simply by setting a bit aside every month.
- Relocate Opportunistically: The job prospects in your chosen field might be drastically different in different areas of the country, so while it might be tempting to stick around somewhere familiar, moving (at least temporarily) could make a great career move. Checking out the Best & Worst Cities for Wallet Wellness will give you an idea of which cities’ economies are growing and where average salaries go the furthest considering the cost of living.
- Improve Your Financial Literacy: “The most common mistake young people make with their money is thinking and believing that since they generally have so little money, there's no point in getting educated about personal financial management,” says Eric Tyson, author of Personal Finance for Dummies.
“But, regardless of your income, you are always spending money and making decisions that impact your finances,” he says, “so it pays to get smarter sooner about handling money decisions for your sake and your parents' sake. And, once you have a steady, full-time job, there's even more at stake.”
You can get a sense of where your money management skills rank by testing your financial literacy and getting your WalletLiteracy Score.