Profile A: Good established credit (690+) and (relatively) high monthly expenses
If you already have good credit, expect high monthly expenses and have no concerns about being able to pay for them, you should definitely take advantage of a rewards card in order to gain value from purchases you would already be making anyways.
There are many types of rewards cards that differ in how you earn rewards and in how you can redeem your rewards. For someone just starting out and looking for a simple way to get great value from their card, I would recommend a simple flat-rate cash-back credit card with no annual fee. This means that for every dollar you spend, you earn a percentage of that dollar as points that you can redeem for “cash” later. This “cash” can be applied to your future credit card balance or it can be deposited directly into your bank account. The flat-rate usually varies anywhere from 1%-2% on every dollar spent. Further, choosing a card without an annual fee ensures that you are not losing value from your card from underutilization. This means you are 100% guaranteed that no matter how much you use your card the benefit is always outweighing the cost.
As an example of the kind of value you can get out of a flat-rate cash-back card let’s consider a 1.5% cash-back card with no annual fee. Someone with $1200 of monthly expenses billed onto their card could get $18 cash back each month or $216 each year. In my eyes, that’s a free flight home for Christmas every year!
Below I have linked a few reviews for top-rated flat-rate cash-back cards!
Chase Freedom Unlimited- The Points Guy Review
Citi Double Cash Card- The Points Guy Review
Profile B: Average (630-690) credit and moderate monthly expenses
If you have average credit, one of your main goals should be working towards building your credit score. Take advantage of low expense periods whether that be during college, when living at home, or by following a strict budget if you’re living on your own in order to ensure that you can safely use a credit card and confidently pay your monthly bills.
Although rewards are great, it is better to focus on quickly and efficiently building your credit with a flexible card that has potential for either an upgrade to a better card or credit limit increase. Try to find a card that does not charge an annual fee even if it offers rewards because if you build your credit fast enough, you can get similar rewards without paying an annual fee. By following best practices for credit cards during this time, you’ll be on your way to good credit in no time and then can take better advantage of rewards!
Below I have linked a few reviews for top-rated cards for average credit!
Capital One Platinum Credit Card- Nerdwallet Review
Deserve EDU Mastercard for Students-Nerdwallet Review
Note: The Deserve EDU card is a great one that even offers rewards if you still qualify as a student!
Profile C: No Credit/Bad Credit
If you are in your early twenties and realize that you’ve never held a credit card and have no loans, you could find yourself in the position of having no credit. If you have had a credit card, perhaps you missed some payment deadlines or charged too much to your card and now have found yourself with a credit score that needs some love.
One of the best ways to build credit from nothing or to significantly improve your credit score is to become an authorized user on someone else’s card. Whether that be your parents, a trusted relative or a close friend, as an authorized user, you can take advantage of someone else’s good credit to both build your own and get access to some good cards.
If you are not in the position to become an authorized user, there’s still a great option for you! Secured credit cards operate much like regular credit cards, however, the user must put down a deposit that the issuer holds onto in case the user misses a payment. The downside to this is that you do not have access to this deposit for as long as you hold the card meaning that in order to hold a secure card, you need to have $200+ available to put down. These cards should absolutely be used as a tool to improve your score as fast as possible. Your goal should be to either upgrade or switch to a new card ASAP so you can get your deposit back and take advantage of better interest rates and perks.
Here is further reading about secured cards so you can find one that’s right for you!