It's no secret that having a good credit score is essential for making large purchases, like a car or a house, but having a good credit score can be a challenge when you're just starting out. As a 20-something, the best way to build a solid credit score is to choose the right credit card. With the right credit card, you can start building a strong credit score and also benefit from rewards, cash back, and other perks. Whether you're looking for a card with a low APR, one that offers rewards, or one that gives you cash back, there are many great credit cards available to those in their 20s. Here are the top credit cards when you're in your 20s.
Reasons Why Good Credit is Important in Your 20s
Credit card companies use a FICO score (or other credit scoring model) to determine whether you’ll be approved for credit and what interest rate you’ll receive. An excellent credit score will save you money on interest payments when you’re taking out a loan and also make it easier to get approved for credit cards. If you have a good credit score, you can potentially earn more rewards, get more cash back, and have a lower APR. Plus, having a good credit score makes it easier to get a loan for things like a car, a mortgage, or a business loan. It’s important to establish a good credit score early on in your career so that you can continue benefiting from it as you get older.
Overview of the Different Types of Credit Cards
Credit cards are incredibly useful in that they allow you to make large purchases now and pay them off over time with a monthly payment. They’re also incredibly dangerous, though, if you don’t pay off your balance in full every month. Credit cards can charge extremely high interest rates, making them a great tool for profit for the credit card company but a terrible choice for consumers. These high interest rates are part of why it’s so important to have a good credit score, because if you don’t, you will be charged a very high interest rate. This can result in paying hundreds or thousands of dollars in extra interest over the life of the loan due to high interest rates.
The Best Credit Cards for Low Interest Rates
If you need to take out a loan, such as a student loan or a car loan, you’ll receive a low credit score. If you have a low credit score, you might have to accept a high interest rate on your loan. Credit cards are a quick and easy way to build credit, but make sure to pay off your balance in full every month to avoid interest charges. If you have a high credit score, you may be able to get a low interest rate on your loan. The best credit cards for low interest rates are those that offer 0% APR for an introductory period. This period of time gives you the opportunity to consolidate your debt and pay it off without incurring any interest charges.
The Best Credit Cards for Cash Back Rewards
The best credit cards for cash back rewards are those that offer rotating categories and a decent percentage back. If you spend a lot on groceries, groceries and gas are often included in rotating categories. Credit cards that offer a high percentage back on a single category are often the best credit cards for cash back rewards, but they are also often the most difficult cards to get approved for. The best credit cards for standard cash back rewards are those that offer a high percentage back. Ideally, you’re looking for a credit card that offers at least 1% cash back. Some credit cards also offer bonus cash-back rewards, such as a $100 sign-up bonus, but these are rare.
The Best Credit Cards for Travel Rewards
The best credit cards for travel rewards are those that offer points that can be exchanged for free airfare or free hotel stays. Travel credit cards often have a higher annual fee, but you can make up for the fee by earning more points. Ideally, you want to choose a credit card that offers a high rewards rate for all purchases, not just travel purchases. The American Express Blue Delta card is an incredible free travel rewards credit card for those starting out in the world of credit cards, especially for those who choose not to opt for the Gold Delta AMEX card which features more benefits but a yearly fee after the first year of $95.
The Best Credit Cards for Flexible Rewards
For the best credit cards for flexible rewards, look for a credit card that offers cash back or a point system. You can then use that rewards system to buy travel tickets or gift cards. Ideally, you want to choose a credit card that offers a high percentage back on all purchases.
Factors to Consider When Choosing a Credit Card
You need to select a credit card that’s right for you and your spending habits. Make sure to consider the APR, especially if you need to take out a loan. You also want to make sure to choose a credit card that reports your payment history to the credit bureaus. You don’t want to choose a credit card that won’t let you build credit. You’ll also want to consider the annual fee. If you pay an annual fee, you’ll want to make sure that fee is worth it. Finally, you’ll want to consider the rewards program and whether or not the credit card is a good fit for you.
Tips for Building Good Credit in Your 20s
Establishing credit in your 20s will help you in the long run and make it easier to get approved for loans in the future, such as a mortgage. It’s important to make sure to only take out what you can afford. It’s also important to pay your credit card bill on time every month. All credit cards report payment history to credit bureaus, so make sure to make your payment on time each month to maintain a good credit score. It’s also important to make sure you have at least one card that has a long credit history. This can be any card, but the longer it has been open the better. You can also help your credit score by getting a small loan, like a car loan, to build credit.
Summary of the Best Credit Cards for 20-Somethings
The best credit cards for 20-somethings are those that offer low interest rates and long introductory periods, cash back rewards, high travel rewards, and flexible rewards. When choosing a credit card, make sure to consider the APR, the annual fee, and the rewards program. Once you’ve established a good credit score, it’ll be easier to get approved for loans and you may also be able to get better interest rates on loans and credit cards.