You just graduated college, got your first job, and want to take on the world? Or perhaps you’re just beginning to take control of your own money and you want to lay the groundwork for your long-term financial health. Either way, having access to a credit card can be a useful resource. However, with so many available, how to choose the most suitable one?
That’s where we come in! This post by FinBuzz will act as your pathway to understanding credit cards by introducing you to the best ones available for young citizens of the USA. When it comes to credit cards, we will break down the key things to keep in mind, share credit card options, and tips for staying on the right side of the credit line.
Credit cards have great benefits for young adults starting to fledge their financial wings. They can help you establish a positive credit history, which is vital when you rent an apartment, apply for a loan or even look for a job.
Furthermore, credit cards offer a way to organize your expenses and monitor your spending. That makes it easier for you to manage your finances. Let us jump right into each of the best credit cards to begin your financial journey!
List of Factors to Consider When Choosing the Best Credit Card for Young Adults
If you are just entering the world of credit cards as a young adult, picking one out can seem a bit daunting. There are a multitude of options to choose from and each has its own features, benefits, and terms.
To assist you in making an informed decision, here are a few factors to contemplate:
1. Credit Score
Think of your credit score like a financial report card. It’s a number that indicates your creditworthiness, or how likely you are to pay back your debts. Credit card companies and lenders use your credit score to determine whether to approve you for a credit card and what interest rate to offer.
High credit score = larger approval amount + lower interest rates. As a young adult, you may not yet have a credit score, or you may have a low score if you haven’t had much experience with credit.
No need to panic, using credit responsibly — like always paying your bills on time and keeping your credit utilization low — is how you can begin establishing the credit you want to have.
2. Annual Percentage Rate (APR)
The annual percentage rate, or APR, is the balance you’ll owe on your credit card, charged in interest. Understanding the APR is essential since it can have a major impact on the total cost of borrowing on your credit card.
If you regularly carry a balance from one month to the next on your card, a high APR can lead to expensive interest charges. If you’re new to credit and still learning how to manage your spending, make sure to look for a credit card with a low APR.
You might interested in reading about,
Best 11 0% APR Credit Cards in the USA 2024
3. Fees
There can be all sorts of fees associated with credit cards, and you’ll want to know about them before you ever apply. Some common fees include:
- Annual fees: Some credit cards have an annual fee simply for owning the card. If you want to keep costs down, look for one that has no annual fee.
- Late payment fees: If you don’t pay your credit card bill on time, you’ll probably be charged a late payment fee.
- Cash advance fees: If you use a credit card to take out cash from an ATM, expect to pay a cash advance fee. It gets expensive so use cash advance only when absolutely necessary.
4. Rewards and Benefits
Most of the credit cards issued by banks today come with rewards programs rewarding you for every purchase you make using your credit card. These rewards can be a terrific way to get a little something in return for what you spend. However, pick a rewards program that fits your spending habits and lifestyle.
If you eat out or go out a lot, find a card that pays you extra rewards in those categories. If you travel often, a travel rewards card could be a strong choice.
5. Credit Limit
It is the maximum amount of money you can borrow in credit on your credit card. You must select a credit limit that makes sense for your spending needs and financial circumstances. A high credit limit comes with a responsibility to not tempt overspending.
It’s best to keep your credit utilization low (that’s the amount of credit you’re using relative to your total available credit) to maintain a strong credit score.
Best Credit Cards for Young Adults in the USA
Having learned what to check for in a credit card, let’s look at some of the best credit cards for young adults in the USA:
1. Secured Credit Cards
A secured credit card can be a good way to begin building your credit score, if you’re new to credit or have little credit history. Secured cards require you to put down a security deposit, which generally serves as your credit limit.
This means you are borrowing your own money, which lowers the risk for the credit card company. In addition to helping you build a good credit history, making your payments on time and using a secured card responsibly will lead to improved credit scores. This can open doors for qualifying for new credit cards or loans in the future.
Below are a few examples of secured credit cards in the USA:
- Discover it® Secured Credit Card: With this card, you earn cashback rewards and get free access to your FICO credit score. It’s also got a program that automatically checks your account to see if you’re eligible to have your deposit refunded after 7 months.
- The Capital One Platinum Secured Credit Card: This card has no annual fee and allows you to grow your credit limit after your first 5 monthly payments are made on time.
2. No Annual Fee Credit Cards
If you’re just starting out, it’s usually best to find a no-annual-fee card. You can save money and keep your costs low because you don’t have to pay a yearly fee just to keep the card open. It is no wonder that young adults go after credit cards with no annual fee since there are plenty in the US.
Below are a few examples of such:
- Discover it® Cash Back: This card earns you 5% cash back in rotating categories each quarter (on up to the quarterly maximum, then 1%) and 1% back on all other purchases. Additionally, Discover will automatically match all cash back earned at the end of your first year.
- Chase Freedom Unlimited®: Some cash-back credit cards, such as Chase Freedom Unlimited®, feature a flat-rate cash back rewards program that earns 1.5% cash back on all purchases.
3. Cash Back Credit Cards
To save on expenses, try a rewards or cash-back credit card. These programs enable you to earn cashback, points or miles on your purchases that you can redeem for discounts, merchandise or travel. It’s a nice way to earn money for your spending and receive something for free for your usual daily spending.
Below are several credit cards that offer competitive cashback and rewards:
- Citi® Double Cash Card: This card delivers a straightforward yet lucrative cash-back program, earning you 1% cash back when you buy and 1% when you pay for those purchases.
- Capital One Quicksilver Cash Rewards Credit Card: If you don’t want to deal with rotating categories or spending limits but still would like to earn rewards, you can go with the Capital One Quicksilver. It earns 1.5 percent cash back on every purchase.
How to Use Credit Cards Responsibly
A credit card can be an extremely useful financial tool, as long as you use it the right way. If you want to both use and keep your credit card, you should keep the following tips in mind so that you don’t ruin your credit history:
1. Pay Bills on Time
This is perhaps the most important thing you can do to get you good credit. Late payments can damage your credit score. That may make it more difficult to get approved for loans or other credit cards down the line.
They can also lead to late fees and penalty interest rates, which can quickly add up. These reminders can be set up or made automatic so you don’t forget what’s due and when.
2. Keep Credit Utilization Low
Your credit utilization ratio is how much credit you’re currently using divided by the total amount of credit available to you. Authorities advise limiting your credit utilization to below 30% to keep your credit score in good standing.
For instance, if your limit is $1,000, keep your balance below $300. A high credit utilization ratio may indicate to lenders that you are overleveraged and less likely to repay your loans. That makes them wary of extending additional credit over time.
3. Track Your Spending
It can be very easy to overspend on a credit card, especially when you are first starting out. Monitoring your expenses will also prevent you from going bankrupt. You might consider a budgeting app, spreadsheet or even just a notebook to keep track of what you’re purchasing and follow your credit card balance
Understanding where your money is going will enable you to make numbers-driven financial decisions and avoid wasting money.
4. Avoid Cash Advances
A credit card cash advance is the process of using your credit card to take out cash from an ATM. Cash advances also have high fees and interest rates, and so they are a very expensive way to borrow money. If cash flow is tight, using a debit card or even getting a personal loan is almost always a better strategy.
5. Read the Fine Print
Take time to read the fine print and understand the terms and conditions before applying for a credit card. This covers things such as the APR, fees, rewards program, and credit limit. Familiarity with your credit card agreement can help you avoid surprises and inform your choices about using your card.
Additionally, you can adopt good financial habits that will help you maintain a good credit score for years to come.
You might love to read about this:
Wrapping Up
Selecting your first credit card, or the best option for you as you’re beginning to establish your financial life, is a major choice. However, with some research and a bit of thought, it is possible to find a card that meets your requirements and helps you build a good credit history.
Do keep in mind that the best options for young adults in the USA are secured credit cards to help you build credit, cards with no annual fees to lower your costs, and cards with cashback or rewards programs to benefit from your spending.
We’ve listed out a few excellent options, but you may want to do your own research and compare several different cards before landing on the right one to complement your lifestyle and financial goals.
Once you do have a credit card, the main thing is to use it right. Pay your bills on time, and keep your credit utilization low, and track your spending so you don’t overspend or incur any debt. Implementing these tips will help you develop a good credit history and pave the way for your financial future.
So, what are you waiting for? Explore some of your credit card options today and make that first move toward a solid financial foundation!
