When you are first getting started in credit cards, there are a ton of missteps you can take but luckily it isn't hard to make a plan to avoid those mistakes. Let’s build a plan that will guide you through your first few years of the credit card game. This plan should help you become familiar with the process and give you a good foundation to build upon. From here you can dive deeper, or stay with these cards and have a relatively simple cash back setup that will serve you well long term.
First, we are assuming that you either have no cards at this point or maybe you have one with no rewards you got as a starter card and are ready to move on to earning rewards for your spending. We are also assuming you will be paying off your balances in full every month. It is important to always keep this in mind as you start into the credit card game. See the previous article in this series here. If you haven't read that already for background on the foundations of our logic when playing the credit card game.
0 Months: Discover It
The rotating 5% categories are relevant effectively forever
Your first year of cash back is doubled, making this a 2% back card for that first year.
There are multiple different cards that allow for finding the right one to make your entry with.
Let’s discuss that last point for a moment. If you have some limited credit history already you should be able to go straight for the regular Discover It card. You might have this history from being an Authorized User on a family member’s credit card or by having another starter card.
If you are a student, you should apply for the Discover It Student Cash Back credit card. This
will give you the best chance of being approved, and the earning categories are the same as a regular Discover It card. Additionally, the card will convert to a standard card after you graduate.
Even if you aren’t a student and don’t have any credit history you could still try to get the regular Discover It. But don’t worry if you get denied, we kind of expected it to go this way. The reason we chose Discover is because we have a backup plan. In addition to the regular and student Discover It cards, there is also a secured card. If you try for either of the other cards and were denied, go ahead and apply for the Discover It Secured card.
The Discover It Secured card only offers 2% back on Gas and Restaurants instead of the rotating 5% categories on the standard Discover It card and 1% on everything else. Luckily, it also offers the first year cash back match just like the other two cards. And even better, after 7 months, Discover will start regularly reviewing your card and will eventually convert your secured card to a standard card and send you back your deposit. Best of all, you don’t even have to go through the work of calling or messaging to ask them for the review. It will just happen.
12 Months: Chase Freedom Flex
Since you’re already familiar with rotating categories with your Discover It card, Let’s both get you the other major rotating category card, and also get you into the Chase ecosystem. The Freedom Flex has rotating categories just like the Discover It but in addition to those it also earns 3% on restaurants and drug stores.
Every 6 More Months: Another Card
As you move forward, you want to keep getting cards that give you better benefits, better earning categories, and ideally a good sign up bonus too. Choose cards that don’t have annual fees to start with because you want these first cards to be ones you keep open for the rest of your life. If you don't get approved for a card you choose, that's ok. Try a different card and come back to it later. The first card you pick should probably be a catch all card of some sort, but it doesn't have to be.
Along those lines, here are a several good ones, both catch-all and not, to pick from:
The Citi Double Cash is catch all card that gives you 1% back when you make a purchase, and 1% back when you pay it off. So that will give you 2% cash back total, which is generally the goal for a catch all card.
The Chase Freedom Unlimited is Chase's catch all card. It gives you 1.5% back on everything in addition to 3% on dining and drug stores just like the Freedom Flex. You might choose to start with this one over a 2% card because you will already be working with Chase and it is easier to deal with less banks to start with. You also might choose it if you were going to build a Chase travel setup in the future, but I wouldn't worry about that for now.
An alternative option for a catch all card if you are an iPhone user is the Apple card. I want to keep this list more generic, but if you are interested, you can learn more here.
The Citi Custom Cash is a great card. It gives you 5% back in the category you spend the most in from the valid categories. You would want this to cover something like groceries or gas in the long term but it can move around to basically whatever your setup needs.
The Bilt Mastercard is a very unique card. If you rent, this card will almost guaranteed let you earn rewards on rent without paying those nasty processing fees* for using a credit card. With this card you can earn 1x points on Rent, 2x points on Travel, 3x points on Dining, and 1x points on everything else. And those are doubled for non-rent transactions that occur on the first of each month.
*To not pay the processing fee, you must use the card 5 times during the month.
The Amex Blue Cash Everyday gives you 3% back at US supermarkets, Gas, and most importantly Online Shopping on the first $6000 you spend each year in each category.
It also has a nice benefit of $7/mo back if you charge the Disney+ Hulu and ESPN+ bundle to the card (12.99/mo for the basic trio plan at time of writing) if you happen to want to subscribe to that.
The Capital One Savor One gives you 3% back on dining, entertainment, popular streaming services and at grocery stores, plus 1% on all other purchases.
In addition, it currently gives you a complimentary UberOne membership and 10% back on Uber and UberEats.
U.S. Bank Cash+ gives you 5% back on two selectable earning categories and 2% back on an additional category. Having to go through and select your categories if you want to move them around can be a hassle and there is a cap of $2000 per quarter to earning 5% back on, but if the categories match up well with your spend, this can be a strong filler card. The ones that stand out to me are gyms and movie theaters but there are a ton of options. Award Wallet detailed more information on these categories here.
An example timeline
If you get each of these cards, one every 6 months, you’ll have cards to get for the first five years of your journey. After three or four years, your credit profile will likely be nice and healthy and you can accelerate your card applications to once every three months if you would like to, or you can easily break from this plan and take it to a different direction.
During these initial few years, take some time to read up more on how different types of card setups work and determine what works for you. Look forward to more articles in this series to help you make that decision and figure out where to go from here.
If you'd like to find me more places, or you want to use my referral links for a card, feel free to check my links out here!