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With each passing year, an increasing number of first-year medical students come from non-traditional backgrounds. That is to say they took a path other than directly from high school to undergrad to medical school (+/- a gap year or two). These individuals are more likely to have lived outside of the purely academic lifestyle and as such experienced the need to establish financial budgets and plans outside of the world of student loans. However, for the majority of students, it is possible that they are finding themselves in professional school (and young adulthood) with little to no previous need for frequent use of credit cards.
For students in their first semester with no current credit card, or possibly a low-limit and seldom used card from their primary bank, it is time to consider establishing your credit profile during your first year in preparation for expenses to come.
What is my credit history and why does it matter for medical students?
Most people are familiar with the notion of a US credit score as a measure used to rank the suspected responsibility of lendees so that potential lenders can make educated decisions regarding the terms of credit lines they offer. Although we would be remiss to not acknowledge the potential systemic issues with this system, it is nonetheless an aspect of life that will impact effectively all medical students at some point. As reported by the AMA in 2016, most medical students will spend thousands of dollars during residency interviews for travel, hotels, and more. For students that do not have the cash fast at hand, would like to claw back some of that expense in the form of rewards, or seek protections offered by some institutions, having a sufficiently high credit limit will help smooth the process of these large transactions. Furthermore, establishing a long history of good lending habits will be crucial should you one day hope to secure a car or home loan at the best possible interest rates.
If you are ready to explore your credit history for the first time, the first thing to know is that the major 3 credit bureaus (Equifax, Experian and TransUnion) are required to provide you an annual report of your credit history! [Important note, your credit history is a report of your monthly credit status from various lines of credit || Your credit score is NOT part of this free annual report, and would require different means to view**.] The general advice is to check each of these three reports evenly spaced out during the 12 month year (since they typically report similar information) thus allowing you opportunities to check for suspicious activity. If you are ready to view your annual report, you can visit the official FTC site at AnnualCreditReport.com, which despite being a “.com” really is the official site as verified by the FTC. During the time of ‘Rona, you can actually check your report weekly until April, 2021!
So where do I get my credit score?
You may have heard ads which boast different services (and even credit cards) offering you weekly free credit score reports at no charge. In general, these different services are great correlations to what your credit score is. It becomes a little more complicated when you find out that you really never get to see your “real” credit score. There are many factors that play into this. First, there are different versions of each credit score provided by each of the different credit bureaus. Although all of these scores use the same general numeric range and are more or less comparable, if you apply for a line of credit with a car dealer, the score they receive could potentially be significantly different from the number sent when you apply for a new apartment credit check. Without getting into the nitty-gritty (far beyond my understanding), the important take away is that your score is very fluid, but it is still smart to monitor it.
It is possible to go directly to a credit bureau and pay to receive your credit score, but as a matter of principle, I avoid this option. Instead, I use a few commercial products that offer credit score “estimates” such as CreditKarma.com and Mint.com along with the score reports provided by a few of my credit cards (#notsponsored). [I once read, paraphrased, “If you are not paying for the service — YOU are the product!” and I very much believe that applies here!] These services make their money by recommending services/products and receiving an affiliate link payment if you sign up through their referral links. These products help track your general credit progress over time and will often send you alerts about significant changes or potentially suspicious activity.
Uh-oh, I trashed my credit?!
Maybe someone opened Toys-R-Us credit card because of the $50 off coupon, max out the card late one night, and managed to repeatedly forget to pay the bill until it hit collections. There are plenty of other understandable situations that can bottom out your credit as well – life happens! Don’t fret, now is the perfect time to get your score back on track before rotations sneak up on you.
Reach out to your primary bank, and set up a secured credit card! With this option, rather than the financial institution offering you a line of credit, you provide your own collateral to lend against. In other words, you provide the financial institution with $250 upfront, you then use your credit card borrowing against that money and repaying it as you would a regular card, and thereby demonstrate your credit worthiness. These cards are a fantastic avenue to quickly bolster your credit history and demonstrate good spending habits. I believe a fantastic option would be to set your card to auto-pay your secured credit card bill balance in full each month, and then use the card to pay for one subscription service (streaming, internet bill, etc). Without any continual effort, you will have month after month of on-time payment added to your credit history! Once your score has risen a sufficient amount, your financial institution may offer to convert your secured credit card to a traditional line of credit – thus refunding the money you provided them up front, and granting you a true line of credit.
What credit cards are good for M1s?
Finally getting to the topic the title of the article promised! So what criteria am I using to justify what qualifies as an ideal card for M1 students? No annual fee, preference for ease of rewards in the form of cash back, and included perks. While there are many benefits offered by various cards, I feel that most first years won’t be spending enough or traveling enough to benefit from airline or hotel point cards (although, these may be cards to revisit for third year interviews!). Similarly, for students with relatively young credit histories, you will be hard pressed to find a card charging an annual fee that offers benefits worth the cost. Finally, built in perks can offer flexibility that may surprise individuals used to exclusively using their debit cards.
Discover IT – Cash Back Card
This card offers some hard hitting cash back, perks, and is incredibly friendly for young credit histories! With rotating 5% cash back categories each yearly quarter and 1% back on all other purchases, this card is hard to ignore. Three months of gas station cash back and three months of online shopping in the holiday season (including Amazon.com!) is nothing to scoff at! Although it was one of my first cards, it remains one of my most used. Being able to cash out your rewards at any value is much more convenient than the minimum values imposed by most cash back cards. Additionally, their online gift-card platform provides an opportunity to enhance the value of your cash back with offers of $30 gift cards for $25 of cash back credit. With free FICO Score (estimates) & SSN alerts, you can keep an eye on your credit health over time with minimal effort. There are many other perks worth exploring, the friendly attitude of their customer service representatives stands out in the industry from my experience. With the minimal drawback that this card is not always accepted internationally, it is an outstanding card across the board!
Citi Double Cash
This card is ideal for the set it and forget it approach to earning some cash back and growing your credit history. With 1% cash back as you spend and another 1% cash back as you pay your bill, you can easily pull in 2% cash back on all purchases! First year of medical school is no time to waste your free time, and if you would rather get some of your daily spending money back without keeping track of the category of the month, this is the card for you. The ease of this card will likely require you to have some established credit history, but by using this card only as you would spend cash, you can claw back some of the money you spend on gas, groceries, and Grey’s Anatomy textbooks. This card will be accepted virtually anywhere and you can skip the effort other cards require. Overall, this card is a great daily default since you will effectively receive double the default rate (2% instead of 1%) that most cash back cards offer, all while growing your credit history!
US Bank – Cash+
Walking up the ladder of higher credit score requirements, the Cash+ card offers a unique level of customization in individually-selected categories of cash back. Each quarter you will select options at the 5% and 2% levels and then receive 1% cash back on all other purchases. Although the categories offered are subject to change, options such as “Utilities” and “Cable Providers” offers a great chances to earn some retroactive discounts on expenses that typically are challenging to catch a break on. This card also includes free FICO Score (estimates) to track your progression. Overall, this card is a fantastic supplement for students with an established credit history who may already have a primary cash back card.
American Express – Blue Cash Everyday $0/yr [& Preferred $95/yr]
If you are entering M1 year with a well established credit score and are looking to reap the rewards of your efforts, this grouping of cards has a lot to offer. My recommendation here is an exception to my overall goal to focus on no annual fee cards, but I feel the Preferred card has so much to offer for the $95/yr price tag (even on a student budget). The highlight of the card is the 6% back on groceries, 3% back on transportation (gas, rideshare, buses parking, etc), and 1% back on everything else. You can also get 6% back on subscription steaming services which may be small in practice, but it’s the thought that counts. Even for a single student household, taking a look back over your purchase history for the past few months should be enough to weight the potential profit that this card will offer despite the annual fee. If the idea of any fee puts you off, the Everyday version of this card offers about half the cash back in general. Overall, both of these cards offer a chance to get a high rate of return to reward your well kept credit history.
The first year of medical school is undoubtedly an incredibly busy time — something something fire hose — but if you have not taken time to establish a growth plan for your credit history prior to this year, now is the time. If nothing else – open a new credit card, connect it to autopay the full balance from your checking account each month, and use the credit card to pay for a monthly subscription. This simple trick will allow you to rack up month after month of on-time payment history without heavy spending or requiring any active effort aside from smashing that Anki space-bar.