Coming off the high that is travel, and more importantly travel in luxury, I want to touch on one of the more frequently asked questions in the world of credit cards — at what point should I get into the credit card game?
One of the reasons why I love writing about this hobby is the ability to interact with people about it, sharing my personal experiences, helping other people travel more efficiently, and ultimately — just travelling!
But most recently, I got a question form my sister about when she should start gaining points with a credit card. She just recently graduated from college and obviously all of my credit card talk has rubbed off on her. But there are two points that I want to make on this post, because actually, my sister is further ahead than most.
- If you are able to, through your bank, get a college credit card. My sister, like myself, got a college credit card at Wells Fargo (our local bank) and was able to start building credit.
- Make sure that you don’t spend too much time away from the points earning cards (get into the game ASAP)
Having a college credit card will get you on the fast track
A lot of people tend to shy away from credit cards, and the reality of the situation is that they aren’t that bad. I won’t get into details here, but if you are responsible with your money, and you pay your statement off in full each month, there is nothing for you to be concerned about.
What that means is getting started as soon as possible. While I think it would be plausible to get started even earlier, I tend to follow my own experiences — which was getting a card once I got to college. For many, this is a time when you begin to gain some independence, your parents give you a little more freedom. So why not hand over a few thousand dollar credit line — what’s the worst that could happen.
Nothing. There is nothing bad that can happen (wink).
While I have heard of people getting approved for cash back cards and airline cards, I was not as aware of my options, and only applied for a college credit card. The idea of missing out on points or miles makes me a bit nauseous, but I nevertheless was building my credit. And that is what my sister is doing!
While she isn’t gaining any points or miles, she’s created a good base for her now to attack some other credit cards. I will make two notes on the topic though:
- Spend, spend, spend! No matter what type of credit card, make sure that you are spending on it! There is no need to put a massive amount of spend on it if you don’t feel comfortable, but don’t let it just gather dust.
- Don’t get discouraged about not gaining points. No matter how you slice it, if you are building credit, you are making positive strides for your financial future.
Options in college (or earlier)
While I stick to my own personal experiences for explanation, I know that there are other avenues people take. So if you are looking to begin on your credit card journey, are in college (or an equivalent time in your life), and can handle the responsibility of a credit card, here are some of your options:
- College credit card — as mentioned above, you should pretty easily get approved for a college credit card, assuming you don’t have a negative credit history
- Co-sign credit card with a parent — this of course requires a cosignor, but this will develop your credit history and most definitely increase your approval chances
- Discover It cash back credit card — this is a great cash back card that is geared towards college students. Discover matches the cash back you’ve earned in the first year!
Make the switch — quick!
The point of this post, though, is determining when can you switch! At what point will you be able to get a credit card that is bringing you some return? Because that is what we’re all worried about, anyways — right?
So my sister has had a college credit card a few years, she’s developed a solid credit history (or solid enough), so why not jump right into it. I think she is in a perfect position to begin her points earning journey, so this is what I recommended to her in her first year out of college.
1. Sign up for the Chase Sapphire Preffered card
The stigma of “premium travel rewards” card tend to draw some sort of higher order, I don’t think my sister will have any trouble getting approved for the Sapphire Preffered. She has an income and credit history — check.
Even though I was able to get approved for the Chase Sapphire Reserve with a similarly green credit history, I think the lower annual fee (waived the first year) far outweighs the benefits in her scenario.
2. Sign up for the Chase Freedom Unlimited
Of course, when starting with credit cards it is important to learn about the Chase 5/24 rule, so you don’t quickly shoot yourself over it! So naturally I will advise her to get as many Chase cards initially as she can. While the CSP will get her 2x the points on travel and dining, the Freedom Unlimited will cover all other spending, with 1.5x per dollar spent.
3. Downgrade the CSP at the one year mark to the Chase Freedom
Rounding out what many believe is the Chase-trifecta, these 3 cards will give her the highest possible return on her spending — in terms of Ultimate Rewards earning. What I believe to be the most valuable points currency on the market. (to maximize her sign-up bonuses, she could sign-up for this card and receive the bonus)
Finishing it up
At this point she is only at 3/24, leaving her plenty of opportunities for the future, and she has one of the highest earning potentials on the market. With the sign-up bonuses alone, she could have as much as 95,000 Ultimate Rewards alone (what a start!). So don’t shy away from such a lucrative deal!
There is no need to be scared of credit cards, and the earlier you start the better off you’ll be in the long run. Does anyone have any similar success at such an early stage?