Picking the Right Credit Card
As the average graduate’s debt suggests (scarily nearly $3,000), financial institutions are more than happy to hand over credit cards when you're in college, mostly because they assume that rich, tuition-paying parents can back you up. Ironically, now that you’re graduated and employed, it’s a bit harder to convince the lenders of the world to cover your late night IHOP binges. For those of us that no longer have the luxury of a student e-mail address, getting a card is going takes a little more leg work. Here's how to do it.
Why is it so hard to get credit cards now that you’re out of school?
Credit card companies use two main factors to decide whether or not to issue someone a card: income and credit history.
Although you had neither of these while in college, obtaining a credit card was as easy as stopping by one of the ubiquitous application tables, filling in your Social, and calling it a day. Heck, you even got a free T-shirt or Subway sandwich out of it.
Credit card companies jumped at the chance to issue you a card because they knew your parents—who likely had respectable incomes and established credit histories—would be there to bail you out if you got in over your head.
Now that you’re out of school, you still don’t have much of a credit history, your starting salary is fairly meager, and your parents are less willing to serve as a safety net. Add it all up, and you’re just not a good credit risk.
Daunting as it may seem, getting a new credit card is a necessity in this day and age, and it's very doable. Just choose a strategy, and follow through with it.
Strategy 1 – Get a credit card while still in college, and hold on to it for dear life.
For those of you still in college, the easiest solution to this problem is to get a card before graduation, making the matter moot. Since credit cards take a minimum of two years to expire, you’re grandfathered in for at least 24 months, and assuming you make all your payments, you will have little problem renewing the card.
Although there’s no such thing as a new-grad-specific credit card, there are dozens of student-specific cards out there. Student credit cards are a breeze to get, and are no different than non-student cards. One of my favorites, the Citi Dividend Platinum Select Card for College Students (now that’s a mouthful), has all the same features of the Citi Dividend Platinum Card, and doesn’t even say “College Student” anywhere on the front. In addition to a low interest rate, the CDPSCCS rewards you with a cash back rebate of 1% on all your purchases (and 2% on groceries and gas).
The beauty of the college-specific card is that, unlike your school library and gym access, it doesn’t stop working after graduation. You can continue using the card for the life of the contract, and by the time it expires you’ll have a respectable credit history
Strategy 2 – Find the perfect card and hope your application is accepted.
For those of you already out of college, it’s just a matter of knowing what you want, and going to the right place.
The easiest course of action is to inquire with your bank, and see what they have to offer. You’ve been loyal customers for years, and they’ll likely reward you with some form of plastic cash. Bank of America, Washington Mutual, Wells Fargo, and Citi all offer a laughable number of credit cards.
When deciding on a card, there are three general types to look for: low interest, rewards, cash back, and airline miles.
- Abuse your student status – If you're still in college, take advantage of the credit cards that literally get thrown at your feet and keep one after you graduate. You're entitled to a card for two years, so grabbing one before the pomp and circumstance will be a huge boon once you become a marked man (i.e., recent grad).
- Beg your bank – If you don't have a credit card left over from your college years, the easiest way to get one is to inquire with your bank. All the major banks offer a huge number of credit cards, and hopefully you've been a loyal customer.
- Pick a card – Think about which card best fits your requirements. A low interest card is good for those who simply want to make the minimum payment every month (though this is a terrible idea). For people who make a lot of purchases, the reward/cash back card is the gift that keeps on giving back every time you buy something using the card.
- Mileage cards – These are worth the annual fee for frequent travelers. Every time you charge a purchase, you get miles and you can redeem them for airline tickets.
- Don't go overboard – The fewer credit cards you apply for the better. Applying for numerous credit cards in a short period of time can adversely affect your credit score.
