Just graduated from college? This guide offers options for your journey to building a good credit score and avoiding debt.
Just finished school? Congrats! It wasn’t always easy, but you made it. As you get started on your credit journey, here are some of the best credit cards for college graduates, whether you just walked across the stage or decided to go back for more in grad school.
However, since the CARD Act went into effect in 2010, it became difficult to get a credit card before turning 21. It’s technically possible to get a credit card in your own name as long as you’re at least 18 years old and have proof of income, though lenders are much more strict than when your parents were in their late teens and early 20s.
What to know before applying for a card
Before we talk about picking a card, it’s crucial to highlight the importance of paying your credit card bills in full and on time. With an average interest rate just north of 16%, it’s expensive to carry credit card debt from month to month.
Many young adults shy away from credit cards for this reason. They generally prefer debit cards, and they often use “buy now pay later” services such as Affirm and Afterpay when they need a little more time to pay off a purchase (hopefully without interest). However, credit cards offer better buyer protection, and there’s tremendous rewards potential as you get more established.
It’s important for young adults to use credit cards for at least some of their purchases to establish a strong credit history. This will serve you well in so many ways, including the ability to rent an apartment and sign up for a cellphone plan, and later access other financial products such as mortgages, car loans and more lucrative, luxury credit cards.
For newly-minted high school grads
If you just finished high school, your best bet is probably either a student credit card or a secured credit card. It’s also worth considering getting on a parent’s credit card as an authorized user. This can jump-start your credit history and help you access more prestigious rewards right away.
Recent college grads have even more to consider
If this describes you, the good news is that it’s easier to obtain credit in your own name, but more opportunities bring more questions. Your first step should be to check your credit score. According to a 2019 report by Sallie Mae, 13% of college grads didn’t know their credit score. While most credit card issuers are looking for scores in the upper 600s or better, 73% of college graduates estimated their credit scores to be 651 or above.
Petal 2 “Cash Back, No Fees” Visa Credit Card: Best for limited credit
It’s possible that you don’t have a credit score at all if you’re just starting out. Or if you do, it might be relatively low. That’s OK. You can usually bring it up pretty quickly, and there are credit cards that cater to people in your situation.
For example, we recommend looking into the Petal 2 “Cash Back, No Fees” Visa Credit Card. It offers a rewards structure that incentivizes responsible card usage, which can help you train yourself to become a responsible cardholder. To start, you’ll earn 1% cash back on eligible purchases. This rate then will increase to 1.25% cash back on eligible purchases after you make six monthly payments on time, and to 1.5% on eligible purchases after 12 on-time, monthly payments.
The best part is Petal practices forms of cash flow underwriting, which go well beyond the credit score and looks at how much money you have coming in and how much you have going out. This allows the issuer to get more detailed information and potentially approve more people with higher credit limits.
Those higher limits are a huge advantage over secured credit cards, which often limit your purchasing power to no more than a few hundred dollars. The higher your credit limit, the easier it is to keep your credit utilization low – and that’s great news for your credit.
Discover it Secured Credit Card: Best secured card
Speaking of secured credit cards, don’t overlook them if you’re building credit. Despite the security deposit requirement, they can be quite helpful on your credit-building journey – and even earn you plenty of rewards.
Secured cards that offer rewards aren’t that common, but recently, more products of this type have been coming to the market.
The Discover it Secured Credit Card has long been one of the best secured credit cards out there. With this card in your wallet, you can start building a relationship with one of the top credit cards issuers.
You’ll also earn:
- 2% cash back at gas stations and restaurants (up to $1,000 in combined purchases per quarter, then 1%)
- 1% cash back on other purchases
On top of that, Discover will match all the cash back you earn in the first year with the card. Depending on your initial security deposit, you may be able to earn your money back just in rewards within the first year.
Discover will review your account monthly after your first seven months with the card to determine whether you qualify for graduating to an unsecured card. If that’s the case, you’ll get your deposit back.
Discover it Student Cash Back: Best student credit card
Like other student cards, it may have more relaxed approval requirements. What makes the Discover it Student Cash Back stand out, however, is its generous rewards structure.
With this card, you’ll earn 5% cash back on rotating quarterly bonus categories (up to $1,500 per quarter, then 1% – enrollment required). Like the Secured card from Discover, the Student Cash Back also matches all the cash back you earn in the first year. Plus, you’ll get a $20 statement credit each school year your GPA is 3.0 or higher for up to the next five years.
Capital One QuicksilverOne Cash Rewards Credit Card: Best for fair credit
If your credit is average, you can start looking into unsecured credit cards from top issuers.
It’s not unheard of to get approved for a credit card marketed for good credit while having a fair credit score. But when your credit is young and you’re working to build it, it’s probably not the kind of risk you want to take. Every credit card application will result in a hard inquiry on your credit report. A hard inquiry stays on your report for two years and can negatively impact your scores for one year.
Instead, it’s safer to look into cards marketed for fair credit. One of such cards is the Capital One QuicksilverOne Cash Rewards Credit Card – and it’s a pretty decent offer.
You’ll earn unlimited 1.5% cash back on all purchases, which is a simple rewards structure great for those just starting their credit card journey. Capital One will also consider you for a credit limit increase after the first six months of on-time payments.
The only caveat is the card’s $39 annual fee, which can significantly eat into your cash back rewards. Still, if you put most of your spending on the QuicksilverOne, the rewards can be decent. Plus, once your credit improves, you can request a product change to a card with better terms – Capital One is arguably one of the easiest issuers to deal with when it comes to switching cards.
Chase Sapphire Preferred Card: Best starter travel card
If you’ve graduated not only with a degree, but also with a good credit score, using your time in college to practice good credit habits, you have a lot of options when it comes to credit cards.
At this point, you may be considering getting into travel credit card rewards. But which card should you start with?
The Chase Sapphire Preferred Card is a great card to get you into travel rewards.
With this card, you’ll get:
- $50 annual Ultimate Rewards Hotel Credit
- 5 points per dollar on Chase Ultimate Rewards travel (excluding hotel purchases that qualify for the $50 annual hotel credit)
- 3 points per dollar on restaurants, select streaming services and online grocery purchases (excluding Target, Walmart and wholesale clubs)
- 2 points per dollar on all other travel purchases
- 1 point per dollar on general purchases
Ultimate Rewards points are flexible and offer significant value. With most redemption options on this card, you’ll get a value of 1 cent per point. However, if you redeem for travel through the Ultimate Rewards portal, your points get a value boost to 1.25 per point.
The card charges a comparatively modest annual fee for its class – $95 per year. It’s still a financial commitment, but if your goal is to move to more lucrative cards, the Chase Sapphire Preferred can offer some practice.
Currently, the card comes with a generous 60,000-point bonus after you spend $4,000 in the first three months. This spend requirement may seem quite hefty, but if you redeem the bonus for travel through Chase’s portal, you’ll get $750 in value.
Not a bad way to get into travel rewards, is it?
You won’t get rich off the rewards on most of these cards, but that’s not the point. When you’re new to credit, it’s all about establishing a strong track record of on-time payments while avoiding too much debt. Even if you just put an occasional small purchase on the card and pay it off right away, you’re making progress toward a strong credit score, which will serve you very well in the future.