We have all been bombarded with credit card offers on TV, social media, mailers, and in stores. As a student, I received nearly 5 credit card offers in the mail per week. But what is the hype all about? Aren’t credit cards dangerous? The short answer is NO! When used responsibily, credit cards have countless benefits. Getting a credit card is important for a variety of reasons…
Credit cards are a simple way to help build credit. Your credit score impacts your ability to borrow money/request loans (auto loan, mortgage, personal loan, credit card, student loan, etc.), apply for rental properties, and some employers may even run credit checks before hiring employees. Building and maintaing a good credit score will increase your chances of getting approved for a line of credit with (potentially) lower interest rates if you ever need to borrow money in the future. Your score can impact your ability to go to college, purchase a home, or purchase a car if you plan on borrowing money.
On top of building your credit, credit cards are essential for me while travelling. They remove the hassle of converting cash into local currency or frequently visiting ATMs to withdraw funds using a debit card. Most credit card companies offer very competitive conversion rates, and some do not have any fees for using the card internationally. They also provide increased fraud protection because it is usually easier to dispute a fraudulent charge on a credit rather than debit card. When I am travelling, I always use my credit card and pay it off immediately to avoid handling cash and transaction fees. I also try to maximize the rewards I can receive for using my card.
Speaking of rewards, many credit cards offer unbelievable benefits like cash back, free travel, travel credits, referral bonuses, lounge access at airports, credit score monitoring/updates, certain types of insurance, reimbursements etc. Using a credit card like a debit card allows you to avoid fees while simultaenously providing you with amazing benefits.
A key component of avoiding credit card debt is only making charges you can afford and paying off the card in full each month. Credit cards can have very hefty interest rates, so try not to purchase anything using the card if you do not currently have the money to pay it off. Carrying over a monthly balance can impact your credit score and force you to pay way more in interest/fees.
Building and maintaining a good credit score relies on multiple factors including payment history, credit usage, total balances, credit age, and recent credit. Each time you apply for any line of credit, the lender has to pull your credit score to determine your eligibility. Too many credit pulls can negatively impact your score, so stay away from submitting multiple applications in a condensed period of time. Most credit cards offer access to check your credit score without doing a hard credit pull. While applying, take advantage of pre-approval services to check if you would qualify or not for the line of credit before they submit a credit pull.
All this to say, credit cards can be very advantageous when used responsibly. I currently have three cards that I would highly recommend for different purposes: the Capital One Venture, DiscoverIt, and the Wells Fargo Propel American Express. Each has its own advantages and disadvantages dicussed below. There are many different credit card options, but these are 3 of my favorites! Not only do credit cards help build and establish credit, they also allow people to travel all over the world for free using their points/miles/cash back. When applying for a card, please do tons of research, compare options, and use them responsibly!
Best for travel rewards: Capital One Venture
PROS
- No foreign transaction fees
- 2 miles per $1 spent
- One time statement credit to apply for Global Entry or TSA Precheck (up to $100)
- Redeem miles at any time, in any amount
- Capital One cardholder discounts (for example, they are currently offering 10% back from Macy’s)
- Free access to CreditWise to check your credit score
- Easy to use mobile app that allows you to immediately lock your card if it is missing
- Frequent sign-on bonuses
- Visa card so it is widely accepted outside of the US
- Miles do not expire
- The website allows you to check for pre-approval before applying
- $100 referral bonus for each person who applies with your link
CONS
- 17.24%, 21.99% or 24.49% APR based on your credit score
- No customer service chat option on the app or website
- Chip technology (no contactless payment)
- Metal card so it is very expensive to replace
- $95 annual fee
- Requires an excellent credit score
- One card design
Capital One frequently runs special offers if you apply for (and are approved) for a card AND you meet a minimum spending requirement. I applied for this card to receive 50,000 bonus miles after spending $3,000 in three months (the offer may now be different). The card also offers 2 miles per $1 spent, and it occasionally offers extra miles for specific purchases (currently they are offering 5x miles on UberEats purchases). Miles can be redeemed to cover purchases, use at Amazon, get account credit, transfer to other loyalty programs, book a trip, and get gift cards. The miles convert to roughly $.01 per 1 mile, so the sign-on bonus I received was worth $500. I charged all of my monthly expenses to this card to reach the sign-on bonus, so I would not recommend making additional purchases just to meet the requirements. I also pay the card off completely at the end of each month to avoid interest.
This is my personal favorite card to use while travelling because the rewards really add up. I received the $500 bonus which I used to cover most of my roundtrip plane ticket to South Africa. I also applied for Global Entry and received my statement credit of $100 within two billing cycles, which makes this card even more enticing for frequent travellers. Since it is Visa, it is widely accepted while travelling and offers $0 foreign transaction fees. In my experience, the conversion rate is very comparable to the actual rate. I now average about $10/month in miles just from my everyday purchases. Capital One customer service is only accessible over the phone which is a struggle when you are outside of the country. Despite this, their customer service agents have always been very helpful whenever I needed their assistance. The app offers you the ability to lock your card temporarily if it is misplaced, and Capital One does not require travel alerts.
This card is not a good option for those with no/bad credit since it requires a good - excellent credit score according to NerdWallet. Outside of that, it is excellent for both travelling and everyday purchases. This is my go-to card and the benefits you receive typically offset the annual fee.
It has a 5/5 star rating on NerdWallet and is my overall pick for travel and rewards.
Best for building credit: DiscoverIt Student Cash Back
PROS
- No foreign transaction fees
- Higher approval for those with no/bad credit
- Access to FICO to check your credit score
- Easy to use mobile app that allows you to immediately lock your card if it is missing
- 1% cash back on all purchases and 5% cash back on specific purchases (based on a rotating, quarterly schedule)
- Redeem cash back at any time, in any amount
- $50 referral bonus for both you and your friend who gets approved
- No annual fee
- Discover matches all cash back you earn in the first year as a cardholder
- 25 card designs
- Cash back does not expire
- The website allows you to check for pre-approval before applying
- 0% Intro APR for 14 months (purchases and balance transfers)
CONS
- Discover card so it is not as widely accepted outside of the US
- Chip technology
- 11.99% to 22.99% APR after inital period
Apply using my referral code to receive a $50 statement credit if approved!
This was one of my first credit cards I had as an undergraduate student, and it is a great option for those looking to build or improve their credit. It is targeted at students who may not have any credit history. According to NerdWallet, it requires an average credit score. There is no annual fee and no interest in the first 14 months. There is an enticing referral program that offers $50 to both the person referring and applying.
I base my card usage on the rotating cash back schedule (for example, one quarter each year they have 5% cash back on all restaurants, so I try to put all my restaurant charges on the card to maximize the benefits). It is a great idea to get as much cash back as you can in the first year because Discover will match your overall cash back during your first year as a cardholder. Despite these benefits, this is not the card to apply for if you are trying to earn the most points/miles/cash back. I would only earn $.01 cash back on a $10 purchase, as compared to 20 miles/~$.20 on my Capital One Venture.
While travelling, this is one of my backup cards in case I lose my Capital One Venture. Discover is not accepted widely outside of the US, so it can be challenging to find places that accept the card. Despite this, there are no foreign transaction fees which is an added benefit. The app is very useful to add travel notifications and temporarily lock your card if it is misplaced.
It has a 4.9/5 star rating on NerdWallet and is my overall choice for people looking to build or improve their credit.
Best for daily use: Wells Fargo Propel American Express
PROS
- No foreign transaction fees
- No annual fee
- Contactless payment capability (but it still has chip technology)
- Easy to use mobile app that allows you to immediately lock your card if it is missing
- Access to FICO to check your credit score
- Points do not expire
- Usually a sign-on bonus
- 3x points on certain purchases, 1x points on all others
- Cell phone theft protection (if you pay your cell phone bill with the card)
- 0.00% introductory APR for 12 months from date of account opening
- Access to American Express and Wells Fargo discounts for cardholders
CONS
- American Express card so it is not as widely accepted
- 14.49% to 24.99% APR after inital period
This card seems like a middle ground between the Capital One Venture and the DiscoverIt Student Cash Back. According to NerdWallet, it requires a good - excellent credit score to be approved for the card. There is no annual fee, and the first 12 months have 0% APR. The card typically offers a sign-on bonus that is currently valued at 20,000 bonus points after spending $1,000 in the first three months. You earn 3x points on select purchases, otherwise 1x points on all other transactions. Points can be redeemed for gift cards, flights, hotels and other travel offers, redeem to your account, merchandise, auctions, or limited-time offers. The cash redemption value of the points is $.01 per 1 point, so the sign-on bonus equates to ~$200. When redeeming points for cash, it must be done in increments of $25.
Regarding travel, this card offers decent rewards and has no foreign transaction fees. The downside is that American Express is not widely accepted outside of the US, so it may be difficult finding places that accept the card. Contactless payments are increasingly common outside of the country which is offered by this card. The app is user-friendly and offers the ability to instantly lock your card if it is misplaced.
This card has a 4.9/5 star rating on NerdWallet and is my overall pick for daily use.