Best Credit Card for a New College Grad

Terry Says

First, congratulations to your son on graduating with no credit cards, and thus no credit card DEBT!  (I’m hoping he is also budgeting for repayments of his student loan debt.)

He does need a credit card — for everything from airline travel or car rentals and to make other purchases.  BUT you need to inform him about the dangers of debt.   With most cards, if you make only the minimum monthly payment on your balance, it could take you 30 years to pay it off!  And along the way you’ll pay 4x the amount you charged in interest payments!

Having dutifully passed on that critical information, let’s turn to the practical.  Likely he will be offered credit cards as companies troll for new cardholders who are college grads. But the best and most practical way to teach the best use of credit — and to get a card if he has no credit history — is to get a “secured” credit card — where the security is a deposit he makes in the card-issuing bank.  So if you deposit $2500, that’s his maximum line of credit.  He should charge a small amount monthly and pay it off on time and in full.  That’s the quickest way to build good credit.  Here’s a link to the best secured cards at Bankrate.com.

As he builds his credit, he will be deluged with traditional card offers, some carrying cash-back offers or mileage rewards. Just remind him that  it’s no “deal” to get miles or rewards if you’re paying 19.8% (or more) in interest on those purchases!