Patrick Crozier / October 12, 2016

If you are new to the world of credit, you aren’t alone. Millions of young Americans just entering college or the workforce are learning they need to establish credit quickly and efficiently. Being only an authorized user on your parent’s credit card, however, isn’t doing you or your credit much good.

Building credit thoughtfully will reap huge benefits for you down the road. You will pay less for loans to help you get the car, home, furniture, or any other large purchase you want, and it might even make the difference between getting or not getting the loan. If you don’t have the cash up front, you’ll have to use credit. So how do you build credit wisely? First and foremost, you need to work with companies that understand your specific needs. Here is what you want:

• You want a credit company that reports to all three major credit bureaus. Experian, Equifax and TransUnion keep separate files of your credit history. They aren’t always identical. In fact, there can be major discrepancies between them, which is why you need to check your credit annually at http://AnnualCreditReport.com. (This site is run by the three bureaus and you are entitled to a free report once each year.)

• You ideally want a credit card company that offers a 0% introductory interest rate, but look at the permanent rate too that kicks in after the introductory period ends. Interest is what drives your true cost of borrowing up. Let’s say you find a sale for 10% off of an item’s original cost. You put it on your credit card and then don’t pay it off right away, or have a higher interest rate. That 10% you were saving is long gone thanks to the cost of asking the credit card company to foot your bill for the item and you not paying it down right away.

• Look for cards that offer you rewards. The great news for people new to credit is that the market is highly competitive. Credit companies are coming up with numerous ingenious cash-back perks, frequent flyer perks, discounts, insider savings, etc. Take advantage of them. They are a great way to save money.

• Look for the cards that have no annual fee. Annual fees add to the cost of credit, obviously, but they can also really add up to a lot. What’s bad for you is good for the credit card issuer. A very effective marketing tool to boost profits (and thus your cost) is to offer great rates, but then charge anywhere from $9.99 to $99.99 for an “annual fee”. Whether you use your card or not, you’ll pay the fee. Now, you can find plenty of options that eliminate or reduce this cost. If you do find a card that has a fee but offers extra advantages to make up for it, consider the deal. It still may work for you.

So where do you find the best deals as someone new to the credit world? Here is a list of the top 5 credit cards specifically tailored for those new to credit:

1. Capital One® Platinum Credit Card. This is a good card because it comes with no annual fee, fraud coverage, monthly reporting to all 3 credit bureaus, access to increased credit line after 5 reliable payments and online or branch checking with no fees. This is one of the most versatile cards for new users, plus you can choose the date your payment is due. It also has no maximum over-limit fee. The cash advance rate is 24.99% and cash advance fee is 3%. It is specifically designed for people with “limited credit histories” or “no history at all”.

2. Capital One ® QuickSilverOne Cash Rewards Credit Card. This card offers all the perks of a Capital One credit product, but has some additional noteworthy advantages. Like the Platinum Card, the QuickSilverOne card is built for people with limited or no-credit history. It has a reasonable annual fee of $39 but it also comes with a rewards rate of 1.5% cash-back to make up for the fee. One of the extras with this card is that it offers a free Uber ride up to $15 every tenth-ride. It also has a cash-back feature that has no limit on how much you can earn. The APR for this card is 23.24%.

3. USAA Classic American Express. This is another card that offers perks with an annual fee of $35. They also keep a keen eye on new customers to see when they qualify for an upgrade based on improved history of payments. It offers collision damage waivers and theft coverage if you use it to rent a car. If you are in the military, there are special deployment rates that you could qualify for. The regular APR is 18.15% to 24.15%.

4. Discover it® For Students. If you are still in college this may be the best card for you. It comes with a regular APR of 0% for six-months of your purchases and a regular APR of 13.24%-22.24%. There is no annual fee and you can earn cash back for things like Amazon purchases, Sam’s Club perks, gas and restaurant costs. It can save you up to $1,500 per quarter with your purchases. You also get 1% unlimited cash back on your purchases.

5. Gettington Credit. This is a new player in the market but the great news is that as a new bank offering credit products, they are highly competitive. You can take advantage of this and get your credit up and running. This card offers a regular APR of 14.9%-19.9% – considerably lower than other more well-known options. It also offers exclusive sales offers and promotions. There are no annual fees and it is a great place to start your credit journey.

If you are looking to establish your credit, look to companies that offer credit products specifically tailored to those new to the world of credit. They will offer additional perks that make your purchases that much more valuable!

Patrick Crozier, Staff Writer
Financial Help Desk