Study: Credit Cards for Young Professionals
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The best credit cards for young adults have good rewards and benefits but low fees. Use this must-read guide to help narrow down your search.
What You Need to Know As a Young Professional
No matter what your financial situation is, having the right credit card in your pocket is a wise move. It can help you manage your cash flow when it's not steady. But even better than that, it can actually help you save money by taking advantage of the rewards.
A credit card is also essential to building your credit history. As you move further into adulthood, you'll need that credit score for almost every major thing you do, from buying a car to renting an apartment. Employers may even do a credit inquiry as part of a background check.
For twentysomethings picking out their very first credit card, it can be very confusing and jargon-y. So we've put together a guide to credit cards for young adults to help you navigate these new waters.
If you pick the right card for your goals, you'll have an easier time making them happen.
The ideal credit card for young adults is one that offers good rewards and benefits without excessive fees. It might sound simple enough, but there are a ton of choices out there and it's easy to fall into the trap of getting the wrong credit card or applying only to get declined.
How to Choose the Right Card For You
The "perfect credit card" simply doesn't exist. A card that's great for your friend may have little use to you. You'll come across some benefit you love on one card (like a super-low interest rate) but also notice some glaring negatives (like a fee added onto purchases when you travel internationally). You'll need to zero in your priorities to get what you want.
Here are some things you should keep in mind:
- Rewards: Look for a credit card with rewards that fit your lifestyle. What's the point of earning rewards on grocery shopping if you rarely step foot in a supermarket?
But watch out. Rewards credit cards tend to have high interest rates. If you occasionally carry a balance - meaning you don't pay your credit card bill in full each month - you should look for a credit card with low interest rates instead. For instance, you might have some large purchases on the horizon, like furnishing your new apartment.
- Benefits: Paying by credit card means you expect certain benefits. It's no longer enough that credit card companies offer $0 fraud liability and the right to use the card. Many include perks such as extended warranty and return protection. Get familiar with the options out there and see how much you can get with your next card.
- Fees: Unless you are a big spender, you should look for a credit card without an annual fee.
However, sometimes an annual fee makes sense if your spending is very predictable and you're able to take advantage of an especially beneficial rewards program.
For example, if you spend more than $61 a week on groceries, you may want to consider the Blue Cash Preferred from American Express, a CreditDonkey partner. The Blue Cash Preferred gives you 6% cash back at U.S. supermarkets on up to $6,000 per year in purchases (then 1%). But it does have a $95 annual fee.Tip: If you routinely spend thousands per month on your credit card, a card like the Chase Sapphire Preferred might be worth considering. It has an introductory annual fee of $0 the first year, then $95. But this card lets you earn 50,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $625 toward travel when you redeem through Chase Ultimate Rewards®, Chase's online travel portal.
Cash Back Rewards
For most young adults, a credit card that gives you cash back is very attractive. Whether you're shopping or eating out, you could be getting something for every dollar you spend.
If you keep your spending within your budget and can pay off your balance every month, these cards can be a joy to use and very rewarding to boot.
Look for one with a rewards structure you can follow and that fits your spending patterns.
Cash Back: Barclaycard CashForward earns you an unlimited 1.5% cash back on everything you purchase, so there are no "special categories" that change you throughout the year that you have to keep up with.
Plus, Barclaycard CashForward has no annual fee and it offers a $100 cash rewards bonus after you spend $500 on purchases within your first 90 days from account opening.
But that's not all. It has a 0% introductory APR for 15 months on balance transfers made within the first 45 days of account opening. After that, there's a variable APR, currently 15.24%, 20.24% or 25.24%, depending on your creditworthiness. Please note that there is a 3% balance transfer fee ($5 minimum).
To learn more about this no annual fee cashback credit card, read our Barclaycard CashForward Review.
Low Interest Rates
Low Interest: We get it, sometimes life happens. As a young adult in today's uncertain job market, you may not have consistently steady cash flow each month. Barclaycard Ring offers a 0% Introductory APR for the first 15 months on purchases. Plus, you'll get a 0% introductory APR for 15 months on Balance Transfers made within 45 days of account opening. After that, a variable APR will apply, 13.49%. There are no balance transfer fees, no foreign transaction fees, and no annual fee.
Credit Card for Traveling
It's great to travel when you're young. You have the energy and enthusiasm to see exotic countries before you get tied up with responsibilities. As a hard-working young professional, it's also nice to get away and go on vacation. Compare the latest travel credit card deals here.
Look for a travel card with rewards you can understand that will bring you closer to your travel goals. If you're an overseas traveler, watch out for cards that carry a foreign transaction fee (which applies to every purchase made outside the U.S.).
Chase Sapphire Preferred lets you earn 50,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $625 toward travel when you redeem through Chase Ultimate Rewards®. You can earn 5,000 bonus points if you add your first authorized user and make a purchase within the first three months from account opening. This card lets you earn 2X points on travel and dining at restaurants & 1 point per dollar spent on all other purchases worldwide. The points can be transferred 1:1 to leading frequent travel programs including airline transfer partners. The card has a $0 foreign transaction fee. The card also comes with premium travel and purchase protection benefits (including trip cancellation/trip interruption insurance and auto rental collision damage waiver). There is an Introductory Annual Fee of $0 the first year, then $95.
If you prefer a specific airline or hotel chain, take a look at travel credit cards to see how long it would take you to score a free flight or hotel stay. Also, look into earning airline miles and points - if you are a frequent traveler, you really stand to benefit if you pay attention to both your earning and redeeming options.
Credit Cards Based on Your Credit
Another factor that will greatly influence the card you're able to get will be based on your credit score. Here, young people are at an obvious disadvantage as they have had less time to build their credit.
However, whether you have good credit, bad credit or none at all, you can still find the credit card that's right for you. We recommend checking out at least three cards before applying.
with Good Credit
Being a young professional is tough these days.
We've just come out of one of the worst financial crises and are still feeling its lasting effects. Job uncertainty is common, and those who are employed aren't guaranteed job security anymore. All this puts a serious strain on young people's ability to reach family, social, and financial goals.
So, where does all this leave the young professional of today?
More than ever, they need to be in control of their financial standing. The right credit card (if used correctly, of course) can make your life easier and even help you reach your goals. Jump over to this article to see our take on the credit cards to look for if you have been fortunate enough to establish good credit early on.
Blue Cash Everyday offers $100 back if you spend $1,000 on purchases within the first three months of opening your new credit card account. This card earns 3% back at U.S supermarkets (on up to $6,000/year in purchases, then 1%), 2% at U.S gas stations and select U.S. department stores, and 1% on other purchases. The cash back is earned in the form of Reward Dollars that can be redeemed as a statement credit. There is no annual fee.
Plus, there is a 0% introductory APR for 12 months on purchases and balance transfers. After the introductory period, a variable APR applies, currently 13.49% to 23.49%. Terms and conditions apply.
with Fair Credit
If you have fair credit, you can still get a good credit card with useful benefits and reasonable fees.
Capital One Platinum offers a no annual fee credit card to people with fair credit.
Discover it Secured Card reports to the 3 major credit bureaus to help you build or rebuild credit with responsible use. This secured credit card's variable APR is 23.49%. The minimum security deposit is $200 (up to the amount Discover approves) and your credit line equals your deposit. After 7 months, Discover will perform automatic monthly reviews based on your responsible credit management across all your credit cards and loans to see if you could qualify to transition to an account with no security deposit. You will see your FICO credit score for free on your monthly statement and in your online account. There is no annual fee.
But here's where it gets interesting. Discover it® Secured credit card offers rewards: 2% cash back at restaurants and gas stations (on up to $1,000 in combined purchases each quarter); 1% cash back on other purchases. As a promotion for new cardmembers, Discover will match all the cash back you've earned at the end of your first year.
with No Credit
|© The LEAF Project (CC BY-SA 2.0) via Flickr|
Are you new to the world of credit?
- If you are in college, you may consider a student credit card.
- If you are out of college, you'll probably need to consider a secured credit card. A secured credit card does not require a credit history for approval. Instead, it is secured by a deposit.
Discover Student It Card will match all the cash back you've earned at the end of your first year. This offer is only for new customers. This card earns 5% cash back in bonus categories that change each quarter (up to the quarterly maximum; requires free activation each quarter). All other purchases earn 1% cash back.
Plus, you can earn $20 cash back each school year your GPA is 3.0 or higher for up to the next 5 years.*
Related: Credit Cards for Beginners
with Bad Credit
If you have bad credit, there is still hope.
We all make mistakes, especially when we're young. If you've made a few and have been branded with a bad credit score, you have a whole lifetime to rebuild. The most effective way to do that is to prove that you can be depended on by using a credit card wisely.
You can consider using a secured credit card to help rebuild your credit history.
Citi® Secured MasterCard® reports to the 3 major credit bureaus to help you build credit history. This secured credit card's variable APR is 22.99%. A minimum $200 security deposit is required. There is no annual fee.
Credit cards are a convenient way to keep track of your spending and manage your finances. They're also an important tool for building credit that will help you later in life. Find the one that best fits your needs and you'll get other rewards too, whether it's cash back or travel miles. And if you're still in the process of building credit, use one responsibly to show that you're a reliable credit user, and one day you'll be eligible to receive such perks too.
Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author's alone, and have not been reviewed, approved or otherwise endorsed by any card issuer. This site may be compensated through the Advertiser's affiliate programs.
Disclaimer: The information for the Discover it® for Students, Capital One® Platinum Credit Card, Citi® Secured MasterCard®, and Discover it® Secured Credit Card have been collected independently by CreditDonkey. The card details on this page have not been reviewed or provided by the card issuer.