College graduation is a happy, chaotic and transformative time for most. Although I am one of the unlucky ’20 whose senior year ground to a halt, I still am experiencing this transition. One thing that I have been thinking a lot about as I prepare to transition into adulthood is how to make my money work for me. I’m going to be working very hard for every dollar I own, so anything that makes those dollars stretch is worth it.
Of course, investing is the number one way to make your money work for you, however, I am a human that has needs and wants, so that means I will not be able to invest my entire paycheck. Luckily, there is a way to make even the money you spend work harder than you may think.
Credit cards are a wonderful tool that sometimes get a bad rap from people who do not understand them fully. If you’ve only ever used a debit card or your parents or relatives are laden in credit card debt, you may not see the value in them, or you may even be afraid of them. However, the right credit card(s) can bring you a lot of value and help you build towards a better future.
The three main things that you will benefit from with the right credit card are:
- Building/maintaining a good credit score
- Rewards and cash-back
- More protection on purchases and against theft
Unfortunately, you need to have already worked towards #1 in order to fully benefit from #2. Most good rewards cards need a credit score of good (700) or higher. Almost all credit cards offer protection on purchases and when your credit card gets stolen. This means that if someone steals your card to make purchases, you are not liable for those fraudulent charges. Further, many credit cards offer protection on trips that are purchased on that card and extended warranties on big purchases. All three of these benefits are why credit cards are a worthwhile tool to employ in anyone’s personal finance strategy.
Before we move on, I think it’s important to note my philosophy around credit cards. I use them much like a debit card. I always pay it off before it starts charging interest, so when I give tips and recommendations surrounding credit cards please understand that I am also encouraging the correct use of credit cards!
Of course, everyone is different and there will be different considerations and variables to take into account when choosing which card(s) to use. With that said, I believe that credit cards can play a helpful role in almost anyone’s wallet no matter what your situation. Read on to see some simple strategies that can help young people or recent college grads fulfill their credit goals depending on what financial situation you are in.
Two Cents Summary
Decide which profile matches your situation the best and then follow the link to read more details and find specific card recommendations!
Profile A: Good established credit (690+) and (relatively) high monthly expenses: Go for a flat-rate no annual fee cash-back credit card for a no fuss high value tool!
Profile B: Average (630-690) credit and moderate monthly expenses: Look for a flexible no annual fee card that will get you to higher credit in no time! Skip the rewards and focus on building credit.
Profile C: No Credit/Bad Credit: Either become an authorized user on a trusted friend or relative’s card or set up a secured credit card to take the first step toward building credit.