Since I wrote the initial set of posts, quite a few people have asked me about good credit cards. So, I decided to write one about the same.
First a few tips.
- If this is your first card, don’t apply online, you will be rejected. The only sure way to get a credit card is through a credit union (you might become its members via place of residence or employer) and that too in person. Or a bank with whom, you have a checking account (again, in person). I have heard that going to a new bank and telling them that if they give you a credit card then you will open a checking account with direct deposit (of payroll into it) also works.
- Don’t apply for the second card for at least 6 months, give some time for credit history to be built (This rule applies only for the “second” card not after that).
- Every time you are rejected, the chance of getting accepted next time reduces.
- If you are rejected, pick up the phone and call them in person, most likely they will approve it over phone.
- Pay bills in full, some people (probably employed by credit card providers) tell you that if you leave a small balance on card then your credit history will improve, I disagree.
- Increasing credit limit on cards impacts credit score temporarily, so, avoid doing that (unless needed). Also, it reduces the chances of getting a new credit line (card or loan) since the total credit line grows in proportion to gross annual income of the person.
- Visa is the most accepted payment gateway, so prefer visa card over others.
- Have multiple cards, sometimes, while traveling one card might get blocked due to automated fraud triggers, in that case, at least other cards can be used.
- Cards with annual fee usually don’t make any sense except may be for the first year where they don’t charge annual fee (Disclaimer: I don’t own Starwoods Preferred Guest card – which a lot of people recommend is good, I think people who travel a lot and have family will probably find it to be good).
- Time the new card with the purchases in life – eg. if one knows that s/he is going to book flight tickets in next 3 months, apply for a new card, use that card and meet its minimum spending to get the bonus (usually the card bonus will be a more lucrative proposition that the rewards earned in first year of owning the card).
- Cards paying points (which cannot be redeemed for cash) usually have better rewards.
- I have never owned a discover or diners club card not because I don’t want to but because I have never found one with a good value proposition.
- Track credit rating using creditsesame.com, creditkarma.com, or wallethub.com – these are non-FICO ratings but are highly correlated to FICO score (at least that’s what they claim). Barclays provides its credit card holders with real FICO score for free. Discover, now provides free FICO credit score for everyone.
- Use Wallaby app to decide which card to use for which purchase.
- Whenever a card is cancelled, its erased from credit report after the cancellation and causes a sudden drop in credit score then, therefore, ideally, the credit card with longest credit history should never be cancelled unless the other cards have similar long credit history as well (yeah, I know its vague – fact of the matter is I have not found any source which can provide a concrete answer).
Now a list of some good cards
- Bank of America Visa Cash rewards – 3.3% cash back on gas.
- Chase Freedom Visa – 5 points back on different categories every quarter (each point is worth at least 1 cent of cash, it can be redeemed for goods at a higher multiple).
- American Express Blue Cash Everyday – 3% cash back at super markets (including Walmart).
- Capital One QuickSilver Visa Cash Rewards – 1.5% cash back on everything, no foreign transaction fee (the only such card in this list).
- Barclays Arrival Mastercard – 2 points on traveling + dine and 10% extra return when redeemed for travel => 2.2% effective rewards rate.
This list is by no means an exhaustive, its just a collection of good cards which I have owned/own at some point, Wallaby Boost is probably the best automated tool for recommendations.