Having excellent credit is crucial when you’re first starting out as an adult, particularly when it comes to establishing your own financial independence. Obtaining a credit card is one step in that direction. If you use it responsibly, it may help you finance big purchases, establish a good credit history, and raise your credit score. But here’s the thing: You need to know which credit cards are ideal for young people like you since not all of them are the same.
At this point in your life, some will be perfect, while others may be too difficult or inappropriate. So, which credit card do you recommend for young people? Let’s go over all the details you need to know, including our recommendations for the top credit cards under $30, so you can make an informed decision.
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Using a credit card is essential for young adults
If you’re in your twenties, you may be asking, “Should I get a credit card?” or “would a credit card be beneficial for a young adult of twenty-five?” In most cases, yes—as long as you know how to utilize it properly.
Obtaining a credit card, together with making prompt monthly payments and maintaining a low amount, may contribute to the development of credit and the improvement of your credit score. According to Andrea Belzer, a financial educator and coach, “many financial aspects of our adult lives involve our credit score.”
Lenders will check your credit report and score when deciding whether to provide you a loan for large purchases like a house or vehicle. If they think you’re a good bet for a loan, they’ll use that data to set the conditions and interest rate.
Saving thousands (or even tens of thousands!) of dollars over the life of your loan is possible with lower interest rates and conditions that are available to borrowers with higher credit scores and more stable credit histories.
The effects of your credit report and score extend beyond only the loan and credit applications you may submit. Take credit scores as an example: “your credit score also impacts your insurance rates, some employers will look at this for your job, and it will be used to determine if you will qualify to rent an apartment,” claims Belzer.
If you want to be successful as an adult, it’s a good idea to start building a strong credit history and decent score while you’re a young adult. Your credit is an assessment tool in many aspects of your life.
Criteria for a good credit card
Understanding the significance of this move in your twenties, let’s dive into the best practices for selecting a first (or second, depending on your credit history) credit card for young people.
Be sure you know what to look for in a credit card when you compare options:
-Fees. Credit cards, according to Belzer, “can have many fees; everything from annual fees to late payment and over-the-limit fees.” (Belzer, n.d.). Selecting a card with minimal fees allows more of your purchasing power to go toward paying down your debt rather than a plethora of extra charges.
-Loan rates. Credit card interest builds up over time, so it’s best to pay off the whole debt every month. You should get a credit card with manageable interest rates in case you can’t pay it off in full. For those who may be prone to holding a balance, real estate and financial expert Liz Hutz advises to seek for cards with low interest rates.
-Need for credit. “Figure out what you require,” Belzer advises. “As an illustration, is your credit score nonexistent?” Afterwards, a credit-free card will be necessary. To rephrase, there will be a difference between the finest credit cards for young people who have excellent credit and those who do not.
Make sure the card you select fits in with your present credit situation before making a final decision. In light of your present credit score, “be realistic about which cards you can qualify for,” advises Hutz.
Advantages and additional compensation. Consider your spending habits and the intended use of your card before applying for a card; this will help you choose the one with the greatest bonus terms tailored to your spending habits. According to Hutz, before signing up for a rewards program, think about your buying patterns and the types of benefits given, such as cashback, points, or travel miles.
Consider applying for a credit card that gives a rebate on food purchases if you’re a student who spends a lot of money on food. Another option is to search for a credit card that provides travel-related perks, such as additional points for travel-related purchases or discounts on hotel stays or vehicle rentals, if you’re a frequent traveler.
Initial pricing. Try to get a credit card with a low introductory rate if you intend to use it for a large purchase. “For big purchases or balance transfers, it can be beneficial to see if the card offers 0% APR for an initial period,” Hutz explains.
Consider these four top credit cards for young folks
Check out our recommendations and select the one that suits you best now that we’ve gone over the features to look for in a credit card.
The Sapphire Preferred® Card from Chase
Adults who like traveling and have high credit may want to consider the Chase Sapphire Preferred® Card.
An annual hotel credit and 5x points on trips bought via the Chase trips platform are just two of the fantastic travel benefits offered by this card, which comes with a price tag of $95 (with an interest rate ranging from 21.49 to 28.49% as of May 2024).
In addition, you may get 75,000 points after spending $4,000 in the first three months after establishing your account. These points can be worth more than $900 when booked via Chase Travel.
Visa Platinum Secured, Offered by Capital One
Check out Capital One’s Platinum Secured Credit Card if you’re a young adult attempting to get your credit history in order.
There is no annual fee and a security deposit is required for this card, but the interest rate is higher than typical (29.99% variable APR as of May 2024). If you use the card properly, you may earn back your deposit and be promoted to a regular credit card.
Also, the card will automatically evaluate your credit line and, with responsible usage, you may be eligible for a greater line of credit in as little as six months.
Find it® Student Reward Program
The Discover it® Student Cash Back card is one of the finest options for young people who don’t yet have credit if you’re a student.
Since this card is intended for students, it does not matter whether you have a little or no credit history. And that’s not all: there is no annual fee, and you can get 5% cash back on certain categories (and 1% on everything else) with this card.
Additionally, during the first year, Discover provides an unlimited cash back match. If you earned $100 in cash back that year, for instance, Discover would match it with an additional $100.
Card from Wells Fargo Active
For young individuals just starting out with credit, the Wells Fargo Active Cash Card may be a good option since it doesn’t have an extremely complicated rewards or fee structure, which may be a little daunting.
The simplicity of this card is its selling point; in addition to always earning 2% cash back on all transactions, there is no annual fee. This card also features one of the most attractive introductory rates for young adults: 0% APR on purchases and debt transfers for the first fifteen months after activation. (Starting in May 2024, the variable APR will be 202.24 percent, 25.24 percent, or 29.99 percent after the introductory period.”
Many young folks’ biggest monthly cost is rent, according to Bilt Mastercard. However, there are typically significant transaction costs associated with using a credit card to pay rent, which may increase the overall cost. Rent payments made with the Bilt Mastercard not only don’t cost anything, but you can also earn rewards points for every dollar spent, making it a fantastic alternative for young people.
With no annual fee and additional reward areas like 2x points on travel and 3x points on dining, this card might be a great choice for young people looking for their first credit card.
