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What You Need to Know about Applying for a Credit Card as a College Graduate

Now that you have graduated from college, it’s time to start considering how you will organize your finances. A credit card can help you build your credit history, making it easier for you to qualify for larger loans, like mortgages [3]. On top of that, a good credit report can mean that you save money in insurance premiums and receive other financial benefits.

As your consider taking the next step in your financial life, here are some things you should know about applying for a credit card:

A Student Credit Card May Not Be Sufficient

Did you get a credit card when you were still a student? If so, this credit card may not be sufficient. First of all, you might have a cosigner on this card. The Credit CARD Act of 2009 [4] requires those who are under 21 to have a cosigner unless they can prove (usually with a job) that they can make payments. Now that you have had some type of credit for awhile, and now that you (hopefully) have a job [5], you should be able to get credit on your own. This is a step up.

Also, a single student credit card may not offer you the credit availability that you need. Another credit card can help you boost your available credit, improving your credit utilization. Plus, having another line of credit — as long as you are responsible — can be helpful as well. You might suffer a little bit in terms of the average length of your credit history, but over time, a card, other than a student card, or a cosigned card, can be a better help to your credit.

Be Picky

As a student, your choices are often limited when it comes to which credit cards you qualify for. Now that you are a graduate with a steady income, you can afford to be pickier. Think about what rewards you might want [6], and consider other terms, such as interest rate, intro periods, fees, and other items.

The better your credit, the more choice you have. Check your credit report and check your credit score to get an idea of where you might stand. You can use AnnualCreditReport.com [7]for your report, and you can get a general idea of where you stand in terms of credit score from free sites like Credit Karma [8]. Improving your credit situation can help ensure that you get the best deal on a credit card.

Incorporate Your Credit Spending into Your Budget

The thing you have to be most worried about as you apply for a credit card as a graduate student is getting into debt with your credit cards. Increasing your available credit can be a heady experience, and it might feel as though you can “afford” almost anything.

You should never forget that the money on a credit card isn’t yours, though. It’s borrowed. When you use your credit card to best advantage you need to use it as part of a plan. Only purchase items that you planned to purchase — and pay off your balance at the end of each billing cycle. If you use your card for regular spending that you already have money for, you can avoid the problem of debt.

What do you think are essential things for graduates to know when applying for a new credit card?

(Photo: Images_of_Money [9])