As a points collector and blogger, I receive lots of questions about getting started in the points and miles game. Naturally, the first thing I mention is to get your finances in order and become credit card debt free, followed by an introduction into military benefits, rewards programs and determining your own personal goals. But the question that people really have is what credit card to get first. This is where determining goals and setting priorities is crucial. There is no “one size fits all” credit card out there and understanding what to base your decision on can mean the difference between potentially saving thousands of dollars a year, while traveling in style, and to simply waste your time and money.
What am I looking for?
That should be the first question to ask yourself. The fact is that EVERYONE can benefit from switching to a credit card only payment method. Before I continue, let me just reiterate that you will only benefit from using credit cards if you absolutely swear off keeping a credit card balance and not paying the entire statement balance each month. This has to happen 100 percent of the time, or any and all points, miles or cash back earned will have lost significant value.
You need to determine if you would like to travel more and pay less for it, or if you simply want to be rewarded for shopping. If it’s the latter, you are in the market for a cash back card. These cards give you the greatest flexibility on what to do with points earned, as they are usually redeemed as a statement balance or in form of a check. The downside is that cash back is a one cent per point deal, offering the lowest value of any rewards system.
If, however, you like to travel and would like to save money doing so, then you will greatly benefit from a travel rewards credit card. This is where it gets tricky, however, because travel reward benefits vary widely and your average Capital One Venture TV commercial or that Delta SkyMiles credit card offer in the mail offers little to no information on how to actually redeem those points or miles. Furthermore, you don’t really know what that boldly displayed 50,000 point sign up bonus is even worth until you read the fine print. You hear things like “no blackout dates” and “points do not expire”, but what does that actually mean? In order to know what you are looking for, you need to have a general understanding of the Pros and Cons of the different types of travel cards available.
Airline Miles Credit Cards
An airline credit card is probably the first thing that comes to mind when people think of “travel rewards card”. They offer the most direct approach to earning miles towards that first award flight. In most cases however, an airline miles credit card does not make for a very good first rewards credit card. They limit you to one airline (or airline alliance) only and points can expire over time. There are cases where they do make sense, however, but only if you are either a frequent flyer already, or if you live close to an airport that serves primarily as a hub to one airline (FRA=Lufthansa; ATL=Delta). If you already fly on a regular basis, whether it’s business related or not, you probably already have a pretty good idea of what your travel priorities are and it’s not only about earning miles for an award flight, but also about earning that next status with the airline of your choice. In this case particularly, an airline credit card makes total sense and serves well as your first credit card. If you are that person who lives close to Chicago O’Hare (ORD) and are convinced that United will be your airline of choice, go right ahead and apply for that United Mileage Plus Explorer card. The free checked bag alone will probably ensure that the annual fee pays for itself, provided you’re not an active duty service member. Your checked bags fly for free in that case, regardless of credit card used.
If you’re interested in an airline credit card as a first rewards credit card, I personally recommend the JetBlue Plus card. Not only does this card have a very generous earning potential, but if you ever grow tired of the annual fee, you can downgrade to the non annual fee JetBlue card. Both cards offer no foreign transaction fees, which is very rare among annual fee free credit cards.
General Travel Rewards Cards
This is the most flexible option for most. It is also the most complicated one and is really determined by your personal lifestyle and interests. Do you prefer to fly and/or stay in major chain hotels? Or do you like to take out the RV, enjoy camping, or a scenic train ride or river cruise in Europe? All these are major factors in finding that perfect first rewards credit card for you.
Airfare and Hotel
The credit card I recommend to most that are interested in traditional airfare and hotel vacations is the Chase Sapphire Preferred. Granted, Chase is very stringent with its SCRA benefits to service members, but that $95 annual fee easily pays for itself when you use the card as intended. The CSP opens the door to the Chase Ultimate Rewards system, which is probably the biggest bonus this card has to offer. Never mind the 2x points on travel and dining, no foreign transaction fee or the Primary Rental Car coverage, it is all about the value of the points in the end. The 25 percent bonus in the Ultimate Rewards portal this card offers gives you all the flexibility you need if an award flight is not an option, or not the best option. Amex’s Membership Rewards just aren’t there yet and Citi’s ThankYou portal still has a long way to go to become competitive. I do recommend Amex cards at a later point however, because they can help make travel a lot more comfortable.
Also, once you have the CSP, you can supplement it with the Chase Freedom and Freedom Unlimited, neither of which come with an annual fee. The combination of these three cards will ensure you will ALWAYS earn between 1.5x and 5x points. American Express’ annual fee free cards don’t offer that earning potential. There are some truly great Citibank ThankYou cards out there, but none that complement each other this seamlessly. Lastly, if you decide to go with other rewards credit cards first and then later decide you’d like to give Chase’s Ultimate Rewards a try, you may or may not have to wait up to 24 months to apply, thanks to Chase’s 5/24 rule.
Alternative Travel Types
If you view airfare as a secondary mode of transportation when you vacation, or prefer a local Bed and Breakfast over a cookie cutter hotel chain, the you are a candidate either the Capital One Venture or the Barclay Arrival+ card. While similar, both cards each have their unique Pros and Cons and your personal preferences and/or circumstances really determine the best choice for you. The fact that Barclay recently “updated” (downgraded) their SCRA benefits really changes things as well.
Both of these cards offer the greatest flexibility when it comes to travel points redemption, as you can redeem them for virtually any travel related charge. You can redeem them for that TGV train ride in France, a cruise through the Caribbean, camp ground fees, and of course airfare. You simply pay with your card and then redeem the points to “remove” the charge from your credit card bill. The downside is that one point is only worth one cent, making these cards virtually useless for airfare when compared to the competition.
The Capital One Venture card comes with a $59 annual fee, which is waived for active duty service members, no foreign transaction fee and 2x “miles” on all purchases. The Barclay Arrival+ card has an $89 annual fee, only waived the first year, also no FTF and 2x points on all purchases. It, however, also gives a 5 percent point refund on all redemptions, making Barclay’s points slightly more valuable than Capital One’s. The Arrival+ is also a Chip and PIN card, instead of Chip and Signature like most current U.S. credit cards. It uses the PIN as a secondary option, but a PIN can mean the difference between experiencing rejection, and acceptance, at European self service counters, such as train ticket machines. Having a Chip and Signature only card is no huge deal for most of us, even while on vacation in Europe, Asia or Africa, where Chip and PIN has been the standard for over a decade. But for train ride lovers that want to explore the “Old World”, it could mean some occasional inconveniences. Although Visa recently announced that even self-serve machines (ticket machines, pay-at-the-pump feature at gas stations, etc.) have to accept Chip and Signature cards, that doesn’t mean automatic 100 percent compliance and there are many reports of U.S. credit cards still not being accepted at these facilities overseas.
In short, if you believe you can truly maximize the 5 percent point refund or frequently commute by train in Europe or Asia, the Barclay Arrival+ is probably your better option, even if you are an active duty service member. Otherwise, you would possibly benefit more from the Capital One Venture as your first rewards credit card.
Cash Back Credit Card
Travel really isn’t the thing for you and you just want a little more money on the side? Then cash back is the way to go. There are many quality cash back cards out there and the right one really depends on your spending habits. If you have not yet discovered your spending habit by creating a budget, I would definitely start with the Citibank Double Cash card, earning you 2 percent back on all purchases; one at the time of check out and the other when you pay your bill. It is a very solid cash back card and perfect for “getting your feet wet”.
No Best First Rewards Credit Card
As you can see, there is no such thing as a “best first rewards credit card”. It all depends on your lifestyle and spending habits. I hope this article shed some light on the complexity, but also the benefits, of using credit cards only and dropping cash and debit. When used correctly, and with the right card, your savings and travel comfort will increase drastically. Picking the right credit card for you is a huge first step in the process.
As a quick disclaimer, I purposely left out the American Express Starwood Preferred Guest card. I used to view the Amex SPG card as the only hotel credit card to make for a good first rewards card, mainly due to its massive selection of transfer partners. But with Marriott’s acquisition of SPG, I suspect the days are numbered for this truly great rewards card.
What was your first credit card? Any regrets? Please comment below and on our social media pages.