Graduation is a time of transition from the classroom to the office and from college dorms to more permanent residence, but graduation can also mark a major transition for your finances.
Not only will you likely see an increase in both income and expenses, but you may also need to reevaluate the financial practices that you’ve grown accustomed to in favor of what works best now. For example, figuring out what to do with your student credit card.
As a recent graduate with limited credit history, taking on a new card different from your tried-and-true student card can be daunting. But there are several options you can consider that will make the transition simple and even positively affect your credit score.
Here’s everything you need to know about choosing the right card for you and how to upgrade your student credit card.
Student credit cards can be a great way to build credit and even earn rewards while you’re in school. But after graduation, as you begin working, move into a house or apartment and start making larger purchases, your spending and credit needs change.
You should also begin thinking seriously about building your credit score. Your student credit card, along with your student loans and any cards on which your parents may have made you an authorized user, was a great way to begin credit-building, but you need to continue growing your credit history if you want your score to increase.
Credit scoring models factor the average length of your credit history, along with your credit utilization as some of the most impactful aspects of your credit score. The more available revolving credit you have and the longer your average age of credit, the better the boost to your score. Beginning to build those aspects of your credit early can make for more smooth sailing later when you apply for a mortgage or other major loan.
If you’ve decided that now is the time to upgrade your credit card to something new, there are a few ways to go about choosing one that will bring the most value to you based on your spending. Take time to figure out the right option for you.
Ask for a product change with the same issuer
Call your issuer to ask to upgrade to a non-student card in their product lineup. If you had a positive payment history as a student and you’ve secured a steady income after graduation, you should have no problem being granted the change.
If you have the Journey® Student Rewards from Capital One®, for example, but you’d rather earn travel rewards with the Capital One® Venture® Rewards Credit Card or higher cash back percentages with the Capital One® Savor® Cash Rewards Credit Card, you can simply speak with a Capital One representative to request a product change.
You should keep in mind though, that, in many cases, you won’t be eligible to earn a card’s sign-up bonus when you obtain it through a product change with your issuer. If the sign-up bonus is one of the card’s major draws, you’re probably better off applying for the card separately rather than upgrading a current card with your issuer.
Apply for a new card with another issuer
If you’ve done your research and found your ideal new card is offered by a different issuer than your current card, you may choose to keep your student card open and apply for the new card.
Not only will taking on another card be beneficial in terms of rewards and sign-up perks, but expanding your available credit can improve your credit score and help you appear more responsible as a borrower.
In most cases, you should keep your student card open even after your application for a new card is accepted, though. The student card you’ve had open adds to your average length of credit, which can boost your credit score while open or lower it if the account is closed. If you’re not paying an annual fee on the card, there’s no harm in keeping it open but unused or, alternatively, contacting your issuer to request a product change.
Improve your current benefits
If you’re generally happy with your student card and the rewards it offers, you may not feel like you need to take on a new credit card immediately. But it can still be helpful to “upgrade” your card so it better serves your post-grad needs.
If you have the Citi Rewards+℠ Student Card, for example, you may still benefit from 2X ThankYou® Points at U.S. supermarkets and gas stations. But you can ask for a higher credit limit or a lower interest rate now that you’re not a student, to better fit your new lifestyle.
According to Laks Vasudevan, vice president of Discover card programs, that’s exactly what Discover had in mind when developing its student card, which is designed to grow with cardholders.
“After the student graduates, they can continue to use the card and we will use new information that they provide to proactively provide other benefits (line increases, promotional offers),” Vasudevan says.
This is also a good option if you’re not sure your credit is in a good enough position to qualify for the credit card you want. Continue to use your student card responsibly for a couple years until you have a strong credit history and apply for higher-earning rewards cards when you’re more confident in your chances of approval.