Credit cards: Top 5 cards for grads

Credit cards for high school and college graduates offer cash back and, most importantly, no annual fee. If you're not sure you qualify for regular credit cards, there's an option for you, too.

By Odysseas Papadimitriou,?Guest blogger / June 2, 2012

Robyn Wyckoff smiles at her family and friends attending her graduation from the University of Tennessee Health Science Center last month in Memphis, Tenn. Graduates applying for credit cards should look for one with no annual fee.

Kyle Kurlick/The Commercial Appeal/AP/File

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As high school and college seniors around the country don caps and gowns, something aside from a diploma is waiting for them: increased financial independence. Whether they plan to enter the workforce or pursue a more advanced degree, soon-to-be grads will be responsible for more of their own expenses. In other words, it?s time to get that first credit card.

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Convenience, rewards, and low interest rates factor into this recommendation, but credit-building should be their main objective. Graduates? credit standing influences not only their loan and credit card terms, but also their insurance premiums, ability to lease a car or an apartment, and even their likelihood of getting hired in certain fields.

A credit card, if used correctly, essentially serves as a fast pass to a higher credit score. Every month, usage information is relayed to your major credit reports (Experian, Equifax, and TransUnion), and if this information reflects on-time payments and low credit utilization, your credit score will rise.

Not every credit card is suitable for young adults. Getting a credit card with no annual fee should be a college or high school grad?s top priority for two reasons: 1) Budgets are typically tight at this stage in life and 2) the rewards and interest rates available won?t justify paying a premium. One last thing before we get to the cards: If you?re under 21, in order to comply with the CARD Act you?ll either need a cosigner or sufficient independent income/assets to make at least monthly minimum credit-card payments.

We compared more than 1,000 credit cards and identified the following five offers as being the best for grads this spring:

• Discover Open Road Card for Students: Gives you 2 percent cash back on your first $250 in combined gas and restaurant purchases each month, 1 percent cash back on everything else with no spending limit, and 0 percent on new purchases for nine months. It does not charge an annual fee.
• Citi Dividend Platinum Select MasterCard for College Students: For the first six months, this card gives you 5 percent cash back on utilities as well as purchases made at supermarkets, gas stations, drug stores, and convenience stores. Thereafter, you get 2 percent cash back on rotating spending categories and 1 percent on everything else. It also offers 0 percent on new purchases for seven months and does not charge an annual fee.
• Journey Student Rewards from Capital One: Offers 1.25 percent cash back when you pay your bill on time and does not charge an annual fee.
• Capital One Cash Rewards for Newcomers: Provides 2 percent cash back on travel purchases as well as 1 percent on everything else and does not charge an annual fee.
• Orchard Bank Secured MasterCard: While this card offers neither rewards nor a low introductory interest rate, it is an option for graduates who want to make sure they'll be approved for a card. The card requires a refundable security deposit. The fact that this deposit serves as the card?s credit line also means graduates can increase their available credit at will and build credit faster. The Orchard Bank Card has one of the lowest fee structures on the secured credit card market, charging no annual fee during the first year and $35 thereafter.

In deciding which offer to apply for, keep in mind that as long as you have a valid college e-mail address, you should be able to get a student credit card. That?s obviously a good thing, considering the superior terms offered by the student-branded cards listed above. The particular offer you choose depends on which has the rewards that best match your spending habits and whether you have any upcoming big-ticket purchases that warrant a 0 percent introductory interest rate.

If you don?t have a college e-mail address, your choice is between the Orchard Bank Secured Card and the Capital One Cash Rewards for Newcomers. The latter is obviously more attractive, but if you are worried about getting approved because of existing student loans or a limited income, the Orchard Bank card is a much safer bet. It also prevents overspending given that your credit line mirrors the refundable security deposit you place in opening the card.

No matter which card you choose, make sure to use it responsibly. This enables you to move into the next stage of your life assured that you?re setting yourself up for a solid financial future.

? Odysseas Papadimitriou is CEO of Card Hub, a website that helps consumers compare all types of credit cards, including student credit cards.

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