2017 Guide: How to Find the Best Credit Cards for Young Adults
Applying for starter credit cards is a major financial milestone for any individual. If you are a young adult or an undergraduate or someone who has never applied for a credit card before, you may be overwhelmed with the many choices that are available.
You may easily feel lost at sea if you look at the more than 200 options that are available.
What are the best credit cards for young adults? If you are choosing a credit card for the first time, you may have to look at annual fees, annual percentage rate (APR), transaction fees, rewards, and much more.
Where do you actually begin? What are the things that you need to know before you apply for a starter credit card?
As a student when you choose your first starter credit cards, it provides you a perfect opportunity to build an excellent credit history and establish a good credit score. If you are starting out on your credit journey, you need to make informed choices so that you choose the best first credit card for young adults.
After you have chosen the best credit card for young adults, you need to establish a good credit score because it can be used to evaluate everything from your eligibility for a loan to renting an apartment or house to auto insurance, and your credit score may also be used for doing background checks for employment.
In addition to this, a good credit score may enable you to earn rewards points on your daily spending.
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If your child is a young adult starting college, you can help them choose starter credit cards so that they develop financial maturity. With proper planning, budgeting, and guidance, choosing the best first credit card for young adults can enable them to learn about spending and budget responsibility.
One of the important things that you need to remember is that young adults under the age of 21 are not allowed to have their own credit card unless they earn income. Apart from this they may get access to a starter credit card only if it is cosigned by the parents (mother or father), or if they can provide proof of independent income, due the CARD Act of 2009 that limits credit card companies pursuing minors.
Parents need to understand that any unpaid debt or loan that their child may have may affect their own credit scores. They need to take this aspect into account before they provide credit cards for young adults by co-signing the card or authorizing its use.
Parents adding their child as an authorized user may be able to keep a check on their spending habits and also enable them to learn good financial habits. College is usually considered the best time to provide your child best credit cards to start with.
Reasons Young Adults Need Best Credit Cards to Start With
Building Credit Early
Prospective employers, landlords, and even cell phone service providers may look at the credit report of a young adult as part of the background check. You may have no credit record if you do not have a starter credit card.
When you have enough credit activity to get a score, it can always work in your favor. You do need to remember that having best credit card to start with is not enough, you need to use it properly so that you get a positive score.
Use the starter credit cards only when necessary and make the repayments on time. Responsible borrowing and repayment get reflected on your credit score. You can choose to start small and then repay the amount at the end of the month.
Best Credit Cards for Starters Is a Teaching Tool
Going over the monthly statements is a good way to learn about your spending habits. This can enable you to become responsible for your own credit actions. When you analyze the monthly statements, you may be able to determine spending habits that are pushing you into debt and whether you had chosen the best credit cards to start with.
Peace of Mind
When you have credit available, it can provide a layer of financial security for young adults facing an emergency situation. Whether it is an unexpected medical expenditure or a car breakdown or you need to spend more on books, you can have complete peace of mind if you have the best credit cards for young adults at your disposal.
Responsible Use of Starter Credit Cards Comes with Rewards
When you get the best credit cards for young adults, you may be able to take advantage of rewards or cash back programs that the starter credit card provides. You can take complete advantage of these programs when you pay the balances in full each month.
When shopping for best first credit card for young adults, it is best to focus on starter credit cards that are simple. The best credit cards for starters or the best credit cards to start with are those that offer cash rewards as an added bonus.
Picking a Starter Credit Card
The best credit cards for young adults can be broadly classified as:
The rewards category are ideal credit cards for young adults that pay off the balance in full at the end of each month. The rewards credit cards are considered the best credit card to start with as they increase the value of each transaction by returning a certain percentage of money that is been spent in the form of cash back or points.
The non-reward credit cards are best credit cards for starters needing financial help. These credit cards for young adults tend to focus on low APR and extending credit to young adults that require it immediately.
Best Credit Card for Young Adults and First-Time Applicants
The first and best credit cards for young adults, for many people, may ideally be a rewards card. If you do not plan to pay off the balances in full at the end of each month of your starter credit cards, you may need to reconsider the reasons why you need credit cards for young adults.
The exception is young adults who are in desperate need of a credit card. If you find yourself in such a situation, then the best starter credit cards are those that offer 0% APR for first-time credit card applicants.
The next thing that you need to consider is the type of rewards you can get on your starter credit cards. Cashback, travel, airline, or hotel are the common rewards programs that are available on the best credit cards for young adults.
If you do not want to be rewarded in the form of travel rewards, you can opt for credit cards for young adults that provide cash back options. You may get statement credit that pays down the bill at the end of each month, and this acts as a discount on your purchases.
If you travel at least once a year, you can opt for a travel card. Hotel credit cards offer best average rewards, and airline cards provide the best bonuses. If you want better value when choosing starter credit cards, you can opt for travel card. Although these cards offer lower rewards, they compensate by providing better returns on grocery, gas purchases, and dining.
You can also compare the best credit cards for young adults based on your shopping habits. Many online tools are available that enable you to compare different credit cards for young adults based on their shopping pattern.
As starter credit cards are personalized financial tools, it is possible that analysis of your shopping habits makes it easy to choose the best credit cards to start with. This can enable you to determine the best starter card that matches your spending habit.
Factors to Consider When Choosing Starter Credit Cards
If you want to apply for the best credit cards for young adults, you need to be at least 21 years of age. If you are between the ages of 18 and 21, you need either one of your parents or a guardian to co-sign on the credit card.
If you have a job, you may be able to apply for a starter credit card even when you are 18 years of age. The paystubs can be used to prove your financial independence and your ability to pay bills. Alternatively, credit cards may ask you to put down a security deposit, and your credit will be based on it.
FICO Score without Credit Card
FICO has implemented a new model that is used to calculate credit scores. This is aimed at providing a credit score for consumers that are underbanked. The new model of calculation takes into account utility payment history, telecommunication, and address change.
This has opened up the possibility for first-time applicants to choose from a wider variety of credit cards for young adults. This has helped do away with the traditional credit history–required cards. If a young adult is already paying a student loan, they may have a credit score of some sort, and this can be used to apply for the best starter credit cards.
Credit Card with No Credit History
It is possible to get approval for starter credit cards with no previous credit history. There are many student cards that have been specifically designed for young adults with no FICO score. The chances of getting the best credit cards for young adults increase when you apply with a bank that you already do business with.
If you have a checking or savings account with a bank, you may be able to get approval for credit cards for young adults if you speak with them. It is advisable to learn about the many terms before you apply for the best credit card to start with.
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Why Is the First Credit Card Important?
The first credit card for young adults is important as it can help in establishing a financial history. When you develop good credit habits, you may be able to get numerous benefits when applying for loans and making purchases.
When you have access to credit, you may be able to pay for goods and services even when you do not have cash to do so. It is advisable to pay off the debt in full at the end of each month if you want to maintain a good credit score.
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If you accumulate too much debt and do not pay on time, it can affect your credit score, and you may not be able to apply for best starter credit cards.
It is important to review your monthly credit card charges. Although it may be easy to pay off the balance, keeping track of how you are spending the money can help in numerous ways.
Credit card fraud is an issue that a young adult may face at some point in time. Keeping track of your spending can enable you to detect any kind of misuse, and you may be able to protect yourself.
Periodic review of your credit card statement can also enable you to determine if you are overspending. You may have opted for subscription services that you are not using, and looking at your statement can help in identifying such expenses.
Low Interest Rates
When applying for best credit cards for young adults, you need to choose cards with low interest rates. When you have a low interest rate, it minimizes the amount that you pay as interest, which can result in big savings.
Most credit cards offer promotional rates when you apply for a starter credit card. These promotional rates may last just a few months. It is advisable to ascertain what the interest rates will be after the promotional rates end.
Secured and Unsecured Credit Cards
When you apply for unsecured credit cards, you do not have to provide any kind of collateral. The collateral usually is funds in your checking and savings accounts. A good credit score is important to apply for unsecured cards.
If you do not qualify and are unable to apply for an unsecured credit card, you can opt for a secured card. You need to make an up-front deposit in your account to qualify for this card.
When applying for credit cards for young adults, you need to be aware of the many different features and benefits. The best credit cards for young adults offer more features and rewards, but they also charge a higher annual fee.
The basic starter credit card has a low or no annual fee. Fees are charged by credit cards for transactions such as balance transfers and cash advances. You always need to remember that you are borrowing money when you use a credit card, and you are responsible for paying it back.
Conclusion—Best Credit Cards for Young Adults
Although it looks very easy to choose the best credit cards for young adults and seems innocent by swiping now and paying later, if you are unable to make the payments on time, it can hurt your credit score badly.
When you stay in control of what you spend and make the payments on time, your first credit card may enable you to build a good credit score. Compare credit cards for young adults so that you are able to choose wisely based on your specific needs and requirements. When you get a good deal on your first credit card, you may be able to build a strong credit score in no time.
AdvisoryHQ (AHQ) Disclaimer: Reasonable efforts have been made by AdvisoryHQ to present accurate information, however all info is presented without warranty. Review AdvisoryHQ’s Terms for details. Also review each firm’s site for the most updated data, rates and info. Note: Firms and products, including the one(s) reviewed above, may be AdvisoryHQ's affiliates. Click to view AdvisoryHQ's advertiser disclosures.
AdvisoryHQ (AHQ) Disclaimer:
Reasonable efforts have been made by AdvisoryHQ to present accurate information, however all info is presented without warranty. Review AdvisoryHQ’s Terms for details. Also review each firm’s site for the most updated data, rates and info.
Note: Firms and products, including the one(s) reviewed above, may be AdvisoryHQ's affiliates. Click to view AdvisoryHQ's advertiser disclosures.