When you get an SSN (Social Security Number), it's like getting the key to the dazzling kingdom of credit cards. Compared with debit cards, using a credit card has two benefits: first, using credit cards helps build your creditworthiness (we'll explain what that means below); second, credit card spending can earn discounts, cash back, or all kinds of points, and those points can make travel much easier. For more benefits of using credit cards, ymlulu wrote a great article-Getting to Know Credit Cards from Scratch.
What can you do with the points you earn from credit cards? The simplest option is to convert them directly to cash, which is the most flexible and effective approach. A slightly more complicated option is to turn them into airline miles or hotel points. We've already covered just the tip of the iceberg in earlier posts (Using UA Points 1, Using ANA Points). There is still a lot more to explore, and there is so much to say in this area. If you play it well, you can not only save a lot of money, but also greatly improve the quality of your travels. And the most convenient source of these points is credit cards, especially the sign-up bonuses, which often come in the tens of thousands and can easily be enough to cover a one-way ticket back home.
However, the credit cards everyone raves about (such as Chase Sapphire, AMEX Gold, and others) are not necessarily the best choice for beginners. It's like fighting monsters in a game: if you start by taking on the big boss, even though winning would bring rich rewards, in most cases you'll just get crushed. So start by practicing on small monsters, and as you level up, you can take on stronger ones. Once you can easily destroy the small fry, you can try bigger monsters, and eventually work your way step by step toward the boss fights.
In the kingdom of credit cards, your level is your creditworthiness. That includes not just your credit score, but also your credit history, payment history, utilization across all your credit cards, and more. A higher level of creditworthiness not only makes it easier to apply for "holy grail" cards, but also helps you secure very low interest rates when you apply for auto loans and mortgages. Here's one misconception to clear up: many people focus only on the credit score and think that's the most important thing. In fact, a credit score alone is not enough. Many people have very high scores but still can't get good loans because their credit history is too short; U.S. lenders don't trust your credit profile yet. Therefore, I recommend that beginners apply for a credit card as soon as they get an SSN, so their credit history starts building sooner and will help later when applying for a mortgage or auto loan. Keep in mind that a 1% difference in mortgage rates can mean thousands, even tens of thousands, of dollars.
Back to this leveling-up-and-fighting-monsters topic. How do you level up in the kingdom of credit cards? Just like in other games, you start with the small monsters. So which credit card "small monsters" are suitable for beginners to apply for? Before introducing these cards in detail, let's first look at what a credit card suitable for beginners should have:
- No annual fee: No annual fee means you won't be blocked by a fee, and average account age makes up a big part of your credit score calculation (roughly 20%). Remember, do not close your first credit card, because doing so will lower your average account age.
- Easy to get approved for: When your credit history is blank, applying for a great card that gives you tens of thousands of points as a sign-up bonus is unrealistic. The bank won't take on that much risk to give you such a generous deal. A denial not only hurts your mood, it also adds a hard pull for nothing and makes your credit report look worse. So set your expectations correctly. The goal of your first card is not a huge sign-up bonus, but to build your creditworthiness. In that case, getting approved is already a very good outcome; even if the card's credit limit is only a few hundred dollars, it is still the start of your credit history.
- High everyday spending rewards: What do students spend the most on in daily life? Eating out, groceries, gas, and sometimes online shopping. If you can earn more than 1% cash back in those categories, the savings can add up over time.
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All right, now let me proudly introduce the much-loved small monsters:
(1) Chase Freedom® Card
If you have a Chase checking account, it's usually easy to get approved. If you don't, that's fine too (I don't have a Chase checking account either). ymlulu wrote a great article introducing this card, so take a look. The main highlight is 5% cash back in different categories each quarter (up to $1,500 in spending). Here is this year's cash back calendar:
You can see that the 5% cash-back categories for the first quarter (Q1) this year include movie theaters, grocery stores, and Starbucks. If you often shop at a particular grocery store, you can buy enough gift cards in that quarter to cover a full year, and then you'll get 5% all year long there. The same trick works for Starbucks, restaurants in Q2, gas stations in Q3, and Amazon in Q4. In short, it covers the four basic categories of dining, gas, groceries, and online shopping. It's a great starter credit card for students. However, it does require some credit history; it's best to wait until you have a year of credit history before applying. Right now, there is a sign-up bonus of spend $500 and get $125 back ($100 on sign-up, plus $25 for adding a secondary card). You can apply through the link below:
Chase Freedom application link
Hidden feature: Freedom's cash back is given to you in the form of UR points, and you can use UR points in our Points System 101 series. If your creditworthiness improves later and you apply for a Chase Sapphire card, then the points you accumulate with Freedom can be transferred into UA miles. For how to use UA miles, see this introductory guide.
(2) Discover it® Card:
Like Freedom, this one also features 5% cash back in different categories each quarter. In ymlulu's introduction to this card, we learned that this was his first credit card, so I imagine he has a special fondness for it :) The cash-back categories for this year are as follows:
Q1 gas, Q2 dining, Q3 Amazon, and Q4 online shopping（and not just Amazon—all online shopping counts, which makes this a must-have card for Black Friday）. From the Freedom overview above, you probably already know how to use it. It also doesn’t have high credit-history requirements, so it’s fine to apply as soon as you get your SSN! The cash back you earn can be redeemed not only for cash, but also for gift cards. For example, $20 in cash back can be exchanged for a $25 Staples gift card, or $40 in cash back can be exchanged for an $80 Carnival cruise gift card or car rental gift card. If you rent cars often, or dream of taking a cruise to the Caribbean for island views and beaches, Discover is definitely your best choice. If you shop online through Discover Deal, you can earn even more cash back—for example, even buying directly from Apple’s website can earn 5%. Here are some deals I like:
And Discover has a Double Cash Promotion for new users, which means that if you apply for this card now, all the cash back you earn after one year will be doubled! For details, see this article.
Hidden perk: Discover cards in China use the UnionPay network, which means any POS terminal that accepts UnionPay can also accept Discover. You should know that Visa/Mastercard acceptance in China used to be limited to certain stores in major cities, and places that accept AMEX are even rarer. So when you go back to China, using Discover is the most convenient. And every month Discover will also report your credit score, so you can get a rough idea of where your credit stands.
If you want to apply, you can click here (make one purchase of any amount within three months after opening the card, and you can get $50 cash back (and another $50 after one year as the doubling bonus)
(3) Blue Cash Everyday® from American Express:
This transparent card is very good-looking. Not only stylish, but also very practical. Unlike the quarterly cash-back cards above, this card earns 3% cash back on groceries all year long (up to $6,000 per calendar year), so it’s reliable no matter what. If you don’t want the hassle of stocking up on grocery store gift cards, this card is also a very solid choice. It also earns 2% cash back on gas, with no cap.
Hidden perk: AMEX occasionally gives cardholders small offers, such as spend $25 at Amazon and get $25 back, spend $100 at Staples and get $20 back, spend $50 at Lowe's and get $10 back, spend $150 at Diesel and get $50 back, and so on. If you make good use of these offers, the savings can really add up. For a more detailed introduction to AMEX offers, check out this AMEX Offer guide written by ymlulu. More importantly, AMEX is well known for its service. Fraud and similar issues are usually small matters, and if you buy something marked final sale and the merchant refuses to take it back, AMEX may still be able to help!
Application link ($100 back after spending $1000 in the first three months)
(4) Citi ThankYou® Preferred Card for College Students
At first glance, there’s not much that stands out: aside from 2 points per dollar on dining, everything else earns 1 point per dollar. Although the return isn’t as good as other starter cards, and the welcome bonus is pitifully small, this is the easiest card for international students to get approved for, making it a good way to start building your credit history. There’s also a version for the general public, Citi ThankYou® Preferred Card, which has a higher welcome bonus, but it’s harder to get approved for than the student version, so I don’t recommend beginners apply for it right away.
Hidden perk: the points you earn are Citi’s ThankYou Points (TYP), and for an introduction to TYP, see our points system beginner series. With one of Citi’s premium cards, you can also transfer them to airline miles for award tickets. If you don’t want to deal with learning airline miles, you can also redeem them directly for flights at a rate of 1 TYP = 1.25/1.33/1.6 cent (the exact value depends on which premium card you have and which airline you redeem through). We’ll publish a more detailed introduction to TYP in the future.
Here is the application link for this card.
