Beginner’s Guide: First Credit Card

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Credit CardI’m starting a new series to go along with my Everything and ITWOO posts, called the Beginner’s series (which is aptly targeted to beginners). If you’ve been in this game for a while, these posts will not be for you. As an alternative, you could head over to the Saverocity Forum and learn some new information from that community when I release these posts, but make sure to come back ;).

Everyone has their first. Some are shiny, some are dull. Some have foreign transaction fees, some don’t. Some give you rewards, while others don’t. The important thing they all do, though, is give you a credit history. So, if you haven’t signed up for a credit card and you’re looking for your first hit the break.

Credit Card Options

The sky’s the limit in terms of credit cards today, but realistically you won’t get approved for a lot of them if you’ve never had a card before. Fortunately, banks know this and specifically target first time credit card owners with certain cards.

My first card was a Capital One Journey card. Frankly, it’s a very boring card. You earn 1% cash back on everything and an extra 25% of your cash back that month when you pay your bill on time. The APR is outrageous, as would be expected with most credit cards, and the credit limit is very small (it started at $500). Even though, there’s nothing to special about this card, it’s a great starter. My wife and I both had one of these cards for a year before getting any other credit cards and it significantly helped our credit. Also, earning 1.25% cash back on everything was much better than earning 0% back with a debit card.

Here are a few great first time cards:

Capital One Journey: As I mentioned above, this card earns 1% cash back on all purchases and an extra 25% of your cash back earned that month when you pay your bill on time. This is a student card, so you do need to be a student to qualify for it.

  • Rewards: 1% cash back on everything and a 25% bonus on your cash back when you pay your bill on time.
  • APR: 19.8% variable
  • Sign-Up Bonus: None
  • Annual Fee: None
  • Foreign Transaction Fee: None

Discover It: Discover was my favorite credit card for a long time and I still really like it for many reasons. First, you get 5% cash back on rotating categories throughout the year. This cash back can add up quickly when you only use a credit card. Second, redeeming your cash back for gift cards often earns you a bonus. For example, if you redeem $45 in cash back, you can often get a $50 gift card. Some stores offer even more of a bonus than that. In terms of full disclosure, that Discover It link is an affiliate link. Use it or don’t, it’s up to you.

  • Rewards: 5% cash back on rotating categories throughout the year. Cash back is worth more than face value for gift cards. Free FICO score.
  • APR: 0% intro for 6 months (10.99%-22.99% Variable*)
  • Sign-Up Bonus: None
  • Annual Fee: None
  • Foreign Transaction Fee: None

Chase Freedom: Chase Freedom is very similar to Discover It in terms of rewards. You earn 5% cash back on rotating categories throughout the year, same as Discover. The difference is instead of actual cash back, you earn Ultimate Rewards points. Those can be used later on to transfer to a Sapphire Preferred or Ink Bold/Plus to make them more valuable. Once they are on a Sapphire Preferred or Ink Bold/Plus card, you can transfer them to one of 11 travel partners, which makes them very lucrative!

  • Rewards: 5% cash back on rotating categories throughout the year. Ultimate Rewards points can be transferred to 11 travel partners if you have a Sapphire Preferred or Ink Bold/Plus.
  • APR: 0% Intro for 15 Months (13-22% Variable after that)
  • Sign-Up Bonus: $100 cash back after spending $500 in 3 months.
  • Annual Fee: None
  • Foreign Transaction Fee: 3% Fee

Citi Dividend Platinum Select: This is Citi’s version of Discover It and Chase Freedom. I would suggest the above cards before this one, but this is always an option. It just does not have as many lucrative options as Discover and Chase offer.

  • Rewards: 5% cash back on rotating categories throughout the year.
  • APR: 0% Intro for 12 Months (12-22% Variable after that)
  • Sign-Up Bonus: $100 cash back after spending $500 in 3 months.
  • Annual Fee: None
  • Foreign Transaction Fee: 3% Fee

Tips

  • Pay your bill in full, on time. There is no reason to use a credit card as a loan in this game. The interest rates are not worth it and it negates the cash back/points earned. Also, if you miss a payment it will hurt your credit score
  • Don’t start manufactured spending right away. It’s likely your credit limit will not be high enough to start running thousands of dollars through your card and you don’t want to risk a bank getting suspicious about your card activity when it’s your first one.
  • Use it for everything, that you can afford. Earning 1 point or 1% cash back on a $1 purchase is better than earning nothing!

Disclaimer: Only one of the links mentioned above is an affiliate link, but I would suggest any one of these cards as a first credit card to get. I know I know, these types of posts are usually all about selling credit cards… Well, this one is different. This information is wholeheartedly written to help the beginners out there, not to sell you credit cards. If you have a card you would like to suggest a beginner sign-up for, please leave it in the comments. Thanks!


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