Addressing the Fears of Leveraging Credit Card Rewards Part 3: Which Beginner Card(s) Should I Get?

Disclaimer: If you are new to credit card rewards, please read Part 1 & Part 2 of The Fear of Leveraging Credit Cards. I do not get compensated for any of these credit card links. 

 

Questions To Ask

I often times have people ask me, "What's the best credit card to get?" My answer is always, "It depends" or "That's a loaded question". Usually, I follow up their question with this one, "What is more important to you, cash back or travel rewards?" And because I do not immediately answer their question, the person usually loses interest in what advice I have to offer. The reason I respond in this way is because I want whomever I'm giving advice to, to know in a sense, where they stand financially. In the same vein, I write this post in hopes that you will take a hard look at your finances, to see how leveraging credit cards can actually better your financial situation. Some questions to ask yourself:

  • Where does most of my money go? (i.e. - Rent, gas, eating out, shopping, etc.)
  • Am I in debt right now? If yes, should I really be traveling vs. could cash back help my debt situation instead?
  •  I'm planning this trip that I want to go on/take my family on - do I have enough money saved up? If no, would travel rewards or cash back help me save money and actually allow for this trip to happen?

In thinking about your finances and asking yourself these questions, you will find yourself directed either towards cash back, travel rewards, or perhaps both! So now that you have in mind the type of credit card leverage that could help you towards a better financial picture, let's look at some beginner cards!

 

Cash Back

You need cash back because your budget is super tight, and you could use some wiggle room. You need cash back because you're constantly spending huge amounts of money in one particular spend category, and it would be great if you could reduce that outlay somehow. You need cash back because you're not looking to travel anywhere, and banking airline/hotel points won't do your current financial situation any good. If any of these situations sound familiar, then the following cash back cards may be for you.

 

  • Fidelity Investment Rewards American Express Card
    • How It Works: 2% on any and all purchases; no limit to how much you can earn in cash back per year; amount of spend is simply limited by your credit limit.
    • Details: You need to open a Fidelity account, as the cash back is funneled into one of the following accounts -- of which you can leave the money in to grow, or transfer out to your checking account:
      • Brokerage 
      • Fidelity-Managed 529 Account
      • Retirement Account
      • Fidelity Cash Management Account
  • My Take: I personally have this card and I like the straight-forwardness of 2% cash back on all purchases and opened a Cash Management account to link to my card. However, having to transfer the cash back twice (once from the card to Cash Management, then Cash Management to checking) is kind of a pain, but isn't a big deal. The only draw back is that American Express is not accepted everywhere.

 

  • Citi Double Cash
    • How It Works: 2% cash back on all purchases; no limit to how much you can earn in cash back per year; amount of spend is simply limited by your credit limit.
    • Details: You get 1% cash back on your purchases, and only get the other 1% cash back when you pay your bill.
    • My Take: I don't have this card, and since I have the Fidelity, I don't feel like I need it. It's a MasterCard, so it will be more readily accepted than the AMEX, however, if you're not one to pay your bill in full each month, you will have to wait until you do to redeem the other 1%.

 

Travel Rewards

I've said it before, and I'll say it again, you want diversification, and you want options. I don't recommend one particular airline or hotel credit card (as a beginner card) because that pigeon-holes you -- to only redeeming on that airline or with that hotel chain. Those specific airline/hotel credit cards can be later additions to your credit card leverage portfolio, but at the onset, they do not give you the options nor the leverage, to save you money on travel as the following cards do.

 

  • Chase Sapphire Preferred
    • How It Works: You earn 2x the points on "Dining & Travel Related Expenses" and 1x on everything else. If you do a lot of eating out and traveling, this is the perfect card for you!
    • Details: Currently there is a 50,000 point sign-up bonus (up from 40,000!), when you spend $4,000 within 3 months. Annual fee is $0 for the first year, then $95 per year after that. *You can get an additional 5,000 points by simply having an Authorized User on your account (the card doesn't even have to be used!). 
    • My Take: I've personally had this card, but the annual fee came up, and I have another card that affords me close to the same benefits, so I canceled. However, I will probably apply for it again! This is a highly touted card by many travel bloggers because of its great benefits, the best being the available travel transfer partners. These partners give you airline and hotel options, while the Ultimate Rewards program gives you the option to transfer the exact amount of points only when you need to. Chase Ultimate Rewards has the following travel transfer partners:
      • British Airways Executive Club
      • Korean Air SKYPASS
      • Singapore Airlines KrisFlyer
      • Southwest Airlines Rapid Rewards®
      • United MileagePlus®
      • Virgin Atlantic Flying Club
      • Hyatt Gold Passport®
      • IHG Rewards Club®
      • Marriott Rewards®
      • The Ritz-Carlton Rewards®

 

 

  • Starwood Preferred Guest® American Express
    • How It Works: 1x Starpoints® on all spend, 2x the points on paid SPG hotel stays (+1x more bonus points if you have Gold/Platinum status, for a total of 3x) 
    • Details: The current sign-up bonus is 25,000 points, but the past 2 summers that bonus has gone up to 30,000 points. 5,000 extra points if you don't mind waiting a few months!
    • My Take: You might look at this card and think, "Wait a minute... isn't this a hotel specific card that you said not to get?" Yes and no. First of all, SPG is my favorite hotel chain, as their hotels are lovely and their service exceptional. Secondly, this card allows gives you a 25% bonus when you transfer to one of the many airline partners at a 1:1 ratio (20,000 Starpoints® = 25,000 airline miles - which beats American Airline's own co-branded credit card on everyday purchase miles earning power 1.25 mile/$ vs. 1 mile/$)! So the SPG card gives you the double-bonus benefit of being able to redeem for hotel stays as well as transfer to an airline! I've listed a few of the best 1:1 airline transfer partners available:
      • Alaska Airlines Mileage Plan
      • American Airlines AAdvantage
      • British Airways Executive Club
      • Japan Airlines Mileage Bank (JAL)
      • Singapore Airlines KrisFlyer

 

Conclusion

The most important aspect of picking a rewards card is taking a hard look at your finances to see whether a cash back or travel rewards card can help improve your financial situation. If you are already sitting on thousands of dollars in credit card debt, or unable to control your spending, getting another line of credit may not be the most prudent decision. However, if you have a budget in place and a plan for paying off your debt, or if you are already in good financial standing -- one or more of the above cards could really benefit your financial situation by: 1) Helping you keep cash you would have otherwise had to spend on travel 2) Putting extra cash back into your pocket!

If you have any questions, feel free to email me or comment below!

*If you are interested in learning how to plan a trip you have in mind, earn tons of miles/points, and maximize your rewards redemptions, then click HERE!