Need Help Picking First Credit Card

[nyair24]

Hi guys, first post here.

I'm a young adult about to graduate from college, and I need help picking my first credit card. I currently use my debit card for almost all of my transactions, but I'm planning on doing some traveling and I'd like to also get a credit card. I've got it down to a few options: capital one Cash Back, capital one low interest, or an AMEX card.

I currently don't debt spend at all, which makes AMEX an attractive option. I also like the travel rewards they have.

AMEX isn't accepted everywhere though, so I feel like I'm going to need a backup by default even if I go with an AMEX. The Cap One card, with no interest on foreign currency transactions, seems great.

As for getting approved, I'm currently a grad student in his final year (two months left). I don't work now (obviously) but I have a nice paying job lined up starting in July. I have some student loans but that's it, no other debt, and a reasonable bank balance.

Any thoughts, comments would be appreciative. I've found this process amazingly confusing with all the points, rates, miles, etc., so I'm just looking for some unbiased advice, thanks!

[lookingforassistance]

Hi guys, first post here.

I'm a young adult about to graduate from college, and I need help picking my first credit card. I currently use my debit card for almost all of my transactions, but I'm planning on doing some traveling and I'd like to also get a credit card. I've got it down to a few options: capital one Cash Back, capital one low interest, or an AMEX card.

I currently don't debt spend at all, which makes AMEX an attractive option. I also like the travel rewards they have.

AMEX isn't accepted everywhere though, so I feel like I'm going to need a backup by default even if I go with an AMEX. The Cap One card, with no interest on foreign currency transactions, seems great.

As for getting approved, I'm currently a grad student in his final year (two months left). I don't work now (obviously) but I have a nice paying job lined up starting in July. I have some student loans but that's it, no other debt, and a reasonable bank balance.

Any thoughts, comments would be appreciative. I've found this process amazingly confusing with all the points, rates, miles, etc., so I'm just looking for some unbiased advice, thanks!

I'd start looking around your college. Credit Card companies will often set up boths offering cards that appeal toward college students. Start out with a low card ($500 limit) and work your way up. Also think about getting a secure card from your bank if you think you're going to have any issues getting it approved. Check your credit score, this will give you a good idea of what you can get approved for and how much.

Personally I just worry about APR and length of APR%. Miles and points shouldn't be much issue until you start using your card for large purchases (which I don't recommend until you get used to using credit and adjust to your new income).

[kork13]

If you're planning on travelling, I would recommend getting a Visa card. It's the only company (to my knowledge....) that is accepted universally. Mastercard and Amex are also widely accepted internationally, but to a lesser extent than Visa. So for example, you might go to use your CC on this great dinner you just had in Venice, but the place might not be willing to accept an Amex card. Also, I believe that Discover is mostly only accepted in the US.

As for the actual card, I'll make 3 general recommendations:
1) Don't get one with any sort of annual fee. I've never seen a fee-charging card that is any better than a no-fee card. 99 times in 100, you can get all the same rewards, rates, and benefits without the added expense, which will only eat into your rewards.
2) Find one that gives rewards that matches how you will really use it. If you travel alot, maybe one that gives hotel or airline points. If you just use it for everyday expenses, one that gives extra rewards for gas, groceries, or other stuff you buy all the time. Whatever you do, just make sure you get at least a 1% reward, whether it's cash, equivalent points (ex: 10,000 points=$100 off airfare), or whatever. And obviously, if you can get 2%, 3%, or 5% back, all the better. Shop around for the best rewards program.
3) Don't worry too much about the interest rate. You say you don't "debt spend"... Hopefully, this means you don't buy anything that you can't pay for (in full) at the end of the month. Never carry a balance month to month, and you don't really need to worry what interest rate you have--because you'll never have to pay it as long as you never carry over a balance. Also, if you carry a balance, are late on a payment, or anything like that, many cards will stop giving you rewards.

As for recommendations, I personally prefer my PenFed CU Cash Back CC. I get 5% cash back for gas, 2% back for groceries, and 1.25% back for everything else. Also, the reward is credited against my balance monthly, which is nice--many cards credit your rewards annually. Also, I prefer getting rewards in the form of cash back. Points are great, but I, at least, find it hard sometimes to use them. Easier to just get the cash back immediately and not worry about having to collect points.

I know that many people also like the Chase Freedom card, the Discover "Get More" card, and Capital One also has some very good rewards programs--I just worked through their "Card Lab", and it looks like you can get a pretty decent one through them. As I said above, it's all about finding the right one for you.

One last one... I just checked out the AmEx website, and the AmEx 'Blue' looks quite good as well. Once you spend at least $6500 in a year on it, you start getting 5% on gas/groceries and 1.5% on everything else. (before $6500, it's 1% gas/groceries, .5% all else)

[jIM_Ohio]

I would look to get 3-4 CC.

For traveling you cannot beat amex- it has some fees for membership rewards, but by far when I traveled those rewards piled up quickly because some partners double rewards when using amex, and amex rewards can also be transferred to other programs. I remember transferring significant amex points to marriot 1:10 (1 amex point=10 marriot points) to "pay" for my honeymoon.

I took 3-4 vacations off my amex points in a 5 year period- think 5-7 day type vacations with hotel, air and similar accounted for.

I would add discover (1% cash back; 5% on gas purchases) to the short list. You might find another deal at your local bank (like a free safe deposit box or higher interest rate on savings) if you open an account thru them.

I would travel with 3-4 cards. Keep 2 cards in your wallet, 1 in a laptop bag and another card in suitcase. If something is stolen you will still have 2 other places to go to with a card in it.

[isthisused]

I like my Amex that I got at Costco It pays me a fair amount of cash back and it doesn’t cost me a dime because I NEVER carry a balance. but I read the fine print and I wouldn’t use it If I were going to carry a balance. I recommend you get your card from Your regular bank or credit union, that you bank at. Never charge more on it than you can pay in full each month and build your emergency fund so you dont end up using it for an emergency and then carry a balance. Avoid all the sucker offers of 0% and crap like that those offers are only the bait that gets you to start building a balance they all have ways of scamming you to make their $.

[myrdale]

Personally I think you have it taken care of with the debt card. Try to maintain $2-3k in your account and you should never run out (I am ASSUMING that your alot like me here).

Now for the subject of the credit card, I would get a VISA through my local bank. If you do not have the credit history required, open up a secured credit card. This will require you to put $500 or $1000 in an account and leave it alone.

Make sure you pay it off in full every month, every time, on time! You will build a good strong credit history, and with in a year or so you should be applicable for a normal account.

I would personally avoid anything that suggest it will make you money. Go talk to the folks at your local bank, and you will be good to go!!

[boosami]

Personally I think you have it taken care of with the debt card.

It's generally not a good idea to use you debit card for every transaction. If your card or number gets stolen, you can be liable for a lot more than with a credit card. With a credit card, you aren't liable for those charges and don't have to pay them if it is fraud. With a debit card, anything spent is cash out of your bank account. A thief could empty and overdraw your account before the bank could investigate the fraud. You can also have problems when retailers put a "hold" on your funds like at the gas station or hotel, which will pull down your available balance on your account temporarily. I do not carry or use my debit card, at all. (My Amex has ATM capabilities and is linked to my bank account for cash access.)

If you want one single card, you pretty much have to pick Visa. The Chase Freedom Visa is a good card and pretty much anyone can qualify. If you could handle two cards, I'd do an Amex charge card if you qualify with the Visa as a backup.

[boosami]

As for recommendations, I personally prefer my PenFed CU Cash Back CC.

The PenFed Credit Card is great, but you have to be associated with the US Government to apply, or else you have to pay to join an eligible organization (like the NMFA which has an annual fee). Also, since it's a Credit Union, you have to maintain a minimum of shares in an account with them. It's a great card (and I have one) but it doesn't make sense for everyone.

[nyair24]

Thank you so much everybody for your help! This is the ONLY place I've been able to get any kind of tangible answers on this. I feel like I actually have some direction now

Unfortunately I don't qualify for the PenFed card. I can look into volunteering at the Red Cross to qualify though I guess.

A few quick questions:
I read that Amex can actually hurt your credit score due to the way they calculate the ratio for your credit score - is it better for somebody in my position to actually get a credit card to avoid this?
(from ttp://wiki.answers.com/Q/Does_it_hurt_your_credit_score_to_not_use_credit_c ards)

Second, I was under the impression that credit cards are used less overseas, with MasterCard being more prominent, but I could be totally wrong here. I get the sense that the board feels Visa is better?

Thanks again!

[boosami]

I read that Amex can actually hurt your credit score due to the way they calculate the ratio for your credit score - is it better for somebody in my position to actually get a credit card to avoid this?

It also only applies to the Amex charge cards you pay in full each month (green, gold, plat, black) and not to Blue or other Amex credit cards. The charge cards have no pre-set limit, which the credit cards have a normal set limit. Even if you get one with no limit, it probably won't affect your score if much, especially you have at least one other card. With your limited credit history, I'm not sure you'd qualify for a card with no limit (no offense!).

Second, I was under the impression that credit cards are used less overseas, with MasterCard being more prominent, but I could be totally wrong here. I get the sense that the board feels Visa is better?

Both Visa and MasterCard are widely accepted, but Visa is the most likely overseas. You can always get American Express traveler's cheques for places that don't accept credit.

[myrdale]

I read that Amex can actually hurt your credit score due to the way they calculate the ratio for your credit score - is it better for somebody in my position to actually get a credit card to avoid this?

I can not directly answer this question, but I can offer some insight that may help.

First, don't worry about achieving the highest possible score. Also there are no tweaks to adjust the score quickly. The only thing that will raise your score is time and responsiblity.

In general, part of your score is based off of a ratio of your balance verses your available funds. Folks say you want to keep this at 20-30% or less. The proper thing to do, is pay the card off in full every month. Then you maintain a 0% one month to the next. I do not have any experience with AMEX to say what they indicated in your article is true though.

Similarly if a regular card increase your rate from $2k to $5k, this effectively decreases the above ratio.

Another piece of the pie is based on the age of your oldest account. A long history will help increase your score.

Recent late payments affect your score. Over time they fade into the background and affect you less and less.

Bankruptcy and the like are nasty hits that will last several years.

Opening alot of accounts at once can hurt you too. Try to limit yourself to one account every 6 months to year at the most.

Also consider if you pick up a second card, that is a second piece of mail you will have to handle.

Pay everything on time, and live on less than you make. Your score will be fine!

[nyair24]

Thanks again for the replies!

I know Cap One has MasterCard not Visa, but they do have 0% foreign transaction fees, so that's a nice feature.

I did some research and it seems anybody can join PenFed if you join the NMFA or SAME. They charge 1% on foreign transactions, so with 1.25% cash back you come out 0.25% ahead.

Only question is - if this is my first credit card, will I actually qualify? AMEX rejected me (figured this would happen), and they told me to apply again once I have a credit history.

Thanks!

[kork13]

Sometimes it just takes applying to a couple different places. The only way to get a credit history is to use credit, and the simplest way to do that is through responsible use of a CC. I know with PenFed, you tell them what credit limit you want... If you ask for one low enough to make them not worry about you too much, that would increase your chances of getting approved.

First-time credit users normally get between $250-$1000 credit limits. But if you show responsible usage, you can request higher limits and they'll normally do it for you. My first CC 4.5 years ago started at only $500. However, as that CC company started to see that I'm responsible with credit, they progressively bumped it up to the $9000 limit it is today, which is high enough to cover all of my expenses (and then some), but not obscenely high either.

Another way to improve your chances of getting approved as a first-timer is to actually CALL the company (CapOne, AmEx, PenFed, or whoever). Explain that it's your first card, you know you don't have a credit history, but are looking for a decent card to start using. Then ask what they can do to help, even if it's only to give you a really low-limit card, like $250-$500. You're fresh business, so a customer service rep will likely do what they can to at least get you something. And like I said above, show responsible use, and every few months to a year, you can request a higher limit until you have an appropriate limit (based on how you use it).

[boosami]

I did some research and it seems anybody can join PenFed if you join the NMFA or SAME. They charge 1% on foreign transactions, so with 1.25% cash back you come out 0.25% ahead.

Yes, you can join but there are membership fees. You're best off getting a zero fee card, as with a small credit limit your rewards are going to be eaten up by any annual fee.

[nyair24]

Thanks everybody for all of your help. I got approved for the Platinum Visa from PenFed! As a student I get to join SAME for free, and it's $5 to have a share in the credit union.

I really appreciate the advice, it seems like this is the best card I could find!