Getting your first credit card is one of those things that makes you really feel like an adult. If your experience was anything like mine, you went to the bank to deposit your part-time paycheck one day and were informed that you were approved for the bank’s most basic credit card because you recently turned 18 and it was time to start building credit. I felt so mature as I signed the paperwork, but also a bit confused about all the terminology and a little scared of using it wrong. The world of credit cards can seem overwhelming at first, but as long as you follow a few basic rules (avoid charging more than you can pay off, avoid opening too many cards, and maintain a good credit score) it’s pretty easy to get the hang of.
But once you’ve got the basic idea of a credit card down, how on earth do you decide which card to pick?! It seems like every department store offers one, some come in pink (go Barbie!), and others have all the bells and whistles you could ever want, along with some pretty hefty annual fees. If you’re feeling confused, you’re not alone. Credit cards fall into several different categories, so it makes sense to pick one or two that will help you reach your goals faster (which may or may not be the sparkly pink one, sorry to say). Let’s go through some goals you might have and the credit cards that can help you get there, as well as some good options in each category.
1. You’re looking for your first credit card
If you’re trying to decide which credit card is the best to start with, there are a few things you should consider. Many people start with secured cards that have set spending limits and act like debit cards so you can’t spend more than you can afford. Consider it like a credit card with training wheels, if you will. If you’re worried about using a card responsibly, I recommend starting with a card like the Capital One Platinum Credit Card, which WalletHub selected as their top pick for people just starting to build credit.
Another consideration is to start with a credit card that has no fees, which can be a great way to build confidence with credit without having to worry about “getting your money’s worth” because you have to pay a yearly or monthly fee. A no-fee card usually has fewer perks compared to the cards below but can be a bit more straightforward. The Discover It Secured Card is another WalletHub favorite because it has no fee and does have some cashback as a bonus. I started with a no-fee credit card for several years before moving to a cashback card with an annual fee, and I appreciated not having another line item in my budget for a few years until I was ready for it.
2. You’re looking to get money back
If you’re looking to make money while spending money (ironic, right?), a cashback card is a great place to start. Cashback cards will offer a set amount of cash that you get back per dollar you spend (let’s say 2%), with some offering an upfront incentive of a greater percentage back for a set time (often the first 90 days) or on certain categories. These cards can be a great way to accumulate extra money on things you know you’d need to buy anyway, like groceries or gas for your car, and can be used towards fun treats or other financial goals. The biggest pro is that the cash you make back can be spent on anything, often in the form of a credit to help pay off your bill (e.g., if you owe $200 and apply for a $100 cashback credit, you then only need to pay $100 of your own money). I love saving my cashback up all year and then putting it towards buying presents for family and friends during the holidays. It’s important to note that these cards usually have a yearly fee, with higher fees for higher percentages back, so do your research to make sure the cashback is worth the fee for you.
Money magazine did a nice roundup of some good options to check out in this category, including the American Express Blue Cash Card (no annual fee for the first year!) and the Chase Freedom Unlimited Card.
3. You’re looking to optimize for travel
Ahh travel—everyone’s favorite thing to do! And luckily for you, the credit card companies were thinking the same when they began creating cards with specific travel rewards. The idea behind these cards is that you’ll get points or miles as you spend on your credit card, which can then be redeemed at hotels, resorts, or airlines. They can be more lucrative than general cashback cards, but the drawback is that they can only be used for…wait for it…travel. If you know you have a vacation coming up and want to offset the costs of airfare or your hotel, look for travel cards that have point incentives for signing up and then make sure you hit the required spending amount on the card (but please, for everyone’s sake, DO NOT buy things you can’t afford just to get the points. Points are never worth going into debt for!).
A few good travel cards to check out are the Chase Sapphire Preferred Card, the Capital One Venture X Rewards Card, and the Platinum Card from American Express (if you’re a luxury travel girlie)—check out all the pros and cons of each in this travel card roundup from Nerdwallet. Once you’ve got those points, the only thing left to do is buy your free plane tickets and get packing!
4. You’re looking for options
If you want your credit card to be working for you but don’t yet know what you want to put it towards, a card with general point rewards might be just the thing. Companies are typically more generous with their point rewards versus cash rewards since it’s not directly impacting their bottom line. The points can then be exchanged for gift cards, air miles, experiences, or merchandise, similar to how you would buy something online at any other store. If you have a points card and decide you do want to use those points for travel or to get a statement credit (à la cash back), there’s usually an option to convert your points, although the conversion rate might not be the same as if you had a card that was geared towards those things in the first place. According to Business Insider, some of the best general rewards cards on the market right now include the Bank of America Premium Rewards Credit Card and the Chase Sapphire Preferred Card.
5. You’re loyal to your favorite brands and want major perks
Let’s say you travel a lot for work and always stay in the same hotel chain, you’re a huge foodie and love trying new restaurants, or you’re a little obsessed with Amazon Prime fashion. Well, if that’s you, it might be worth checking out cards like the Marriott Bonvoy Amex card, the CapitalOne SavourOne card (10% cash back on UberEats!), and the Prime Visa card. If you’re a die-hard fan of a brand that has a credit card, it could make sense for you to get it. A hotel card, for example, might come with three free nights per year once you hit the minimum spend amount, plus a spa credit and VIP service. If you know you’re going to hit that minimum and love their spa, it might be a good choice.
However, I always recommend being a little bit more cautious about any company-branded credit cards (especially for department stores or similar places) because their interest rates are usually on the high side if you miss a payment and their rewards are typically only going to be valid in one spot (their store). Unless you know you’ll get the value, it’s often better to opt for more general rewards or cashback cards and then sign up for free loyalty programs instead.