Acquiring your first credit card is a significant step towards adulthood. I can relate to the mix of emotions; the feeling of maturity mingled with some confusion about the terminology and a touch of apprehension regarding its proper use. Initially, the world of credit cards can appear daunting, but by adhering to a few fundamental principles (such as not overspending, avoiding excessive card openings, and maintaining a strong credit score), you can quickly grasp the essentials.
However, once you’ve grasped the fundamentals, choosing the right credit card might seem like a perplexing endeavor. With a multitude of options, from store-specific cards to vibrant designs and feature-packed cards with substantial annual fees, it’s normal to feel bewildered. Credit cards belong to different categories, so it’s wise to select one or two that align with your objectives for faster progress. Let’s explore your potential goals and the credit cards that can facilitate achieving them, along with some excellent options in each category.
You’re in Search of Your First Credit Card
If you’re contemplating the best credit card to commence your credit journey, there are a few key factors to consider. Many individuals start with secured cards, which have predetermined spending limits and function like debit cards, ensuring you don’t spend beyond your means. Think of them as credit cards with training wheels. If you’re concerned about handling a card responsibly, I recommend starting with a card like the Capital One Platinum Credit Card, a choice endorsed by WalletHub for those initiating their credit-building journey.
Another consideration is to begin with a no-fee credit card, an excellent approach to build confidence in handling credit without worrying about justifying a yearly or monthly fee. While no-fee cards typically offer fewer perks compared to other cards, they are straightforward. The Discover It Secured Card, another WalletHub favorite, has no fees and offers cashback as an added bonus. I began my credit journey with a no-fee card for several years before transitioning to a cashback card with an annual fee when I felt ready.
You’re Looking for Cashback
If you aim to earn money while spending money, a cashback card is an excellent choice. Cashback cards provide a fixed cashback percentage on every dollar spent, with some offering higher initial incentives for a limited time (usually the first 90 days) or on specific spending categories. These cards allow you to accumulate extra funds on essential purchases like groceries or fuel and can be utilized for indulgent treats or other financial goals. The key advantage is that the cashback you earn can be used for various expenses, often as a credit towards your bill. I personally enjoy saving my cashback throughout the year to buy gifts for my loved ones during the holiday season. Keep in mind that cashback cards often come with an annual fee, with higher fees for greater cashback percentages, so research carefully to ensure the value aligns with your spending habits.
Money magazine has compiled an informative list of suitable options in this category, including the American Express Blue Cash Card (offering no annual fee for the first year) and the Chase Freedom Unlimited Card.
You’re Aiming to Maximize Travel Rewards
Ah, travel – a beloved pursuit for many! Credit card companies have thoughtfully created cards with specific travel rewards. These cards allow you to earn points or miles as you make purchases, which can later be redeemed for accommodations, resorts, or airline tickets. Travel rewards cards can be more lucrative than general cashback cards, but remember that the rewards are typically exclusively for travel-related expenses. If you have a trip planned and want to offset airfare or lodging expenses, consider travel cards with sign-up incentives, and ensure you meet the required spending threshold. However, it’s essential to avoid excessive spending solely to accrue points, as points are never worth going into debt for.
Several worthwhile travel cards to explore include the Chase Sapphire Preferred Card, the Capital One Venture X Rewards Card, and the Platinum Card from American Express (an excellent choice for luxury travel enthusiasts). For a comprehensive overview of the pros and cons of each, refer to Nerdwallet’s travel card roundup.
You Want Versatility
If you wish for your credit card to provide maximum flexibility while you contemplate how to utilize your rewards, a general rewards card with points might be your ideal selection. Companies are often more generous with point rewards compared to cash rewards, as they don’t directly affect the company’s profitability. These points can be exchanged for gift cards, air miles, experiences, or merchandise, similar to an online store. If you have a points card but later decide to use the points for travel or as statement credits (akin to cashback), there’s usually an option for conversion, although the exchange rate may not be as favorable as with cards initially designed for those purposes. Business Insider recommends considering options like the Bank of America Premium Rewards Credit Card and the Chase Sapphire Preferred Card among the best general rewards cards available today.
You’re Brand-Loyal and Seek Premium Perks
Suppose you are dedicated to a particular brand and desire substantial perks. In that case, it’s worth exploring brand-specific credit cards, especially if your loyalty extends to frequent travel or regular spending with that brand. For instance, if you frequently stay in a particular hotel chain, adore culinary experiences at specific restaurants, or are devoted to a retail giant like Amazon Prime, a brand-specific card may be advantageous. These cards often come with enticing rewards such as complimentary nights, exclusive credits, and VIP services. However, exercise caution when considering company-branded credit cards, especially those associated with department stores, as their interest rates tend to be on the higher side for missed payments. Additionally, their rewards typically apply solely within their store. If you’re unsure about receiving full value from such cards, it’s often wiser to opt for more general rewards or cashback cards and join the brand’s loyalty program for free.