Welcome back to my blog. When I graduated from college in 2013, I hadn’t owned a credit card before. A good credit score helps you to get loans to make big purchases such as a car or a house. Today, I am going to let young graduates know the top 5 types of credit cards that can help them build a good credit score. There are a lot of options, so make sure to read them all before selecting the best card for your situation.Â
Secured Credit Cards
These cards are designed for individuals with little or no credit history, making them a great option for someone who has just graduated from college. They require a security deposit, typically equal to the credit limit, which serves as collateral for the credit card company in case you default on payments. Here are a few examples of secured credit cards available from various credit card issuers.
Capital One Secured Mastercard: This card requires a minimum security deposit of $49, $99, or $200, depending on your creditworthiness. It has no annual fee and offers the opportunity to increase your credit limit after making your first five monthly payments on time. You can raise your initial credit line by depositing more than the minimum amount (up to a maximum limit of $1000). It has a $0 Annual fee and a 29.99% Purchase Rate.
Discover it Secured: This card requires a security deposit of at least $200, and the credit limit equals the deposit. It has no annual fee and offers purchase rewards, including cash-back rewards and discounts. Smart habits like paying all your bills on time and in full each month can help you build credit with responsible use. After 7 months, we begin automatic monthly account reviews to see if you qualify to upgrade to an ‘unsecured’ card and get your deposit back.
OpenSky Secured Visa Credit Card: This card doesn’t require a credit check or a checking account, and the security deposit can be as low as $200. It has an annual fee of $35 and can help you establish credit if you make timely payments. Your good payment habits can qualify you for credit line increases every 6 months, which means faster access to cash when needed. After 6 months of good spending, you can unlock an OpenSky Gold Card. With an OpenSky secured card and an unsecured Gold Card, you’ll have a double dose of credit building and spending power. It doesn’t check your credit when applying and has an 87% average approval rate.
Citi Secured Mastercard: This card requires a minimum security deposit of $200, and the credit limit equals the deposit. It has $0 annual fee and offers access to your FICO credit score and other benefits. Purchase APR is 27.49%. It is an option for customers with little or no credit history and can help you build your credit when used responsibly. Once available, you will also have free access to your FICO score online. Tracking your score is a significant first step to managing your credit history and taking control of your financial future.
Student Credit Cards
Many credit card companies offer special credit cards designed specifically for college students. These cards may come with lower credit limits, but they often have fewer fees and offer rewards programs that can help you build credit while you make purchases. Here are a few examples of student credit cards available from various credit card issuers:
Discover it Student Cash Back: This card offers cashback rewards for purchases, including 5% cash back in rotating categories and 1% cash back on all other purchases. It has no annual fee and offers a $20 statement credit each year if you maintain a GPA of 3.0 or higher. It offers UNLIMITED cashback match: Discover will automatically match all the cash back you’ve earned at the end of your first year. So you could turn $50 cash back into $100. Or $100 into $200. There’s no minimum spending or maximum rewards. Just a dollar-for-dollar match. You can redeem for cash in any amount at any time. Even use your rewards to shop for whatever you need at Amazon.com or at millions of online stores with PayPal.
Capital One Journey Student Rewards: This card offers 1% cash back on all purchases and 1.25% cash back when you pay your bill on time. It has no annual fee and offers access to CreditWise, which can help you monitor your credit score. It has $0 annual fee and 29.99 purchase rate. You can be automatically considered for a higher credit line in as little as 6 months. You won’t pay a transaction fee when making purchases outside of the United States.
Bank of America Travel Rewards for Students: This card offers 1.5 points per dollar spent on all purchases, and the points can be redeemed for travel rewards. It has no annual fee and offers a bonus of 25,000 points if you make at least $1,000 in purchases within the first 90 days of opening the account. It has a low Introductory APR offer: 0% Intro APR for your first 18 billing cycles for purchases and for any balance transfers made within the first 60 days of opening your account. After the intro APR offer ends, a Variable APR that’s currently 17.74% to 27.74% will apply. A 3% fee applies to all balance transfers. It offers $0 annual fee and $0 foreign transaction fees.
Citi Rewards+ Student Card: This card offers 2x ThankYou Points at supermarkets and gas stations (up to $6,000 per year in purchases, then 1x), and 1x ThankYou Point on all other purchases. Right now, it offers a whopping 25,000 bonus points after spending $1,500 within the first 3 months of account opening, redeemable for $250 in gift cards. It has no annual fee and offers a 10% bonus on points earned in a billing period.
Store Credit Cards
Some retail stores offer credit cards that can help you build credit. These cards can be easier to obtain than traditional credit cards, but they often come with higher interest rates and fees. However, if you use them responsibly and pay off your balance on time, they can help you establish a good credit history. Here are some examples of store credit cards available, and most major retailers offer them.
Amazon Store Card: This card offers 5% cash back on Amazon.com purchases for eligible Prime members, with a $0 annual fee. Redeem your rewards as savings on your Amazon purchases or as a statement credit.. It also offers promotional financing options for large purchases. You get an extra 5-15% back on select, rotating items throughout the year.
Target REDcard: This card offers 5% off all Target purchases, free shipping on most items from Target.com, and an extra 30 days for returns. There’s no annual fee; it can be used at Target stores and online. Free 2-day shipping on hundreds of thousands of items at Target.com. Earn 2% on dining and gas purchases and 1% everywhere outside Target. You could save up to $675 per year on groceries with RedCard.
Macy’s Credit Card: This card offers a 20% discount on purchases made the day you open the account and a 10% discount on purchases made on Macy’s Star Rewards Days. It means a total savings of up to $100 on your purchase over the two days. It also offers unique financing options and a $0 annual fee.
Best Buy Credit Card: This card offers financing options for large purchases, including 0% financing for 6 to 24 months, depending on the purchase amount. It also offers rewards for purchases, including 5% cash back on Best Buy purchases (or 6% for Best Buy Elite Plus members).
Walmart Credit Card: (through CapitalOne) This card offers 5% cashback on Walmart.com purchases, 2% cash back on Walmart purchases in stores, and 2% cashback on gas purchases at Walmart or Murphy USA gas stations. There’s no annual fee; it can be used at Walmart stores and online.
Low-Interest Credit Cards
These cards are designed for people who want to build credit while minimizing interest charges. They may have higher fees and lower credit limits, but they can help you establish a good credit history if you make timely payments. Here are a few examples of low-interest credit cards available from various credit card issuers
Citi Diamond Preferred: This card offers a 0% intro APR on purchases and balance transfers for 18 months, and then a variable APR of 14.74% – 24.74% applies. It has no annual fee and offers access to Citi Entertainment, which provides special access to events.
Chase Freedom Unlimited: This card offers a 0% intro APR on purchases for 15 months, and then a variable APR of 14.99% – 23.74% applies. It also offers cashback rewards, including 1.5% cashback on all purchases. There’s no annual fee, and it offers a signup bonus for new card members.
Bank of America® Cash Rewards credit card: This card offers a 0% intro APR on purchases and balance transfers for 15 billing cycles, and then a variable APR of 13.99% – 23.99% applies. It also offers cashback rewards, including 3% cash back in the category of your choice (gas, online shopping, dining, travel, drug stores, or home improvement/furnishings) and 2% cash back at grocery stores and wholesale clubs (up to $2,500 in combined choice category/grocery store/wholesale club purchases each quarter).
Capital One Quicksilver Cash Rewards Credit Card: This card offers a 0% intro APR on purchases and balance transfers for 15 months, and then a variable APR of 15.49% – 25.49% applies. It also offers cashback rewards, including 1.5% cashback on all purchases. There’s no annual fee, and it offers a signup bonus for new card members.
Credit Builder Loans
While not technically a credit card, a credit builder loan can help you establish credit. These loans work by depositing money into a savings account that you can’t access until you’ve made all your payments. Once you’ve paid off the loan, you get access to the money in the savings account, and you’ve established a good payment history that can help improve your credit score. Here are some types of credit builder loans available:
- Secured Personal Loans: These loans are secured by a deposit you make with the lender. Typically, the deposit is equal to the amount of the loan. You then make payments on the loan, and the lender reports those payments to the credit bureaus. Once you have paid off the loan, you get the deposit back. Example: Sofi Personal Loan
- Secured Credit Cards: Like secured personal loans, secured credit cards are secured by a deposit you make with the lender. You then use the card to make purchases, and the lender reports your payments to the credit bureaus. Over time, your credit score may improve as you use the card responsibly.
- Credit-Builder Loans: These loans are specifically designed to help people build credit. You borrow a small amount of money (typically a few hundred dollars), and then make regular payments over a set period of time (typically 12-24 months). The lender reports your payments to the credit bureaus, helping to establish or improve your credit score.
- Self-Lender: This company offers a credit builder loan as a type of savings plan. You make monthly payments into an FDIC-insured account for a set period of time (typically 12-24 months), and at the end of the term, you get the money back plus interest. The payments are reported to the credit bureaus, helping to establish or improve your credit score.
Remember, the key to using a secured credit card to build credit is to make timely payments and keep your balances low.
