I got a question the other day asking “what’s a good first credit card to get?” from acquaintance (we’ll call her Joan). A relativley straightforward question.  Joan is going to graduate school, and this will be her first credit card.  She plans on paying graduate school tuition on her card. She doesn’t plan on carrying a balance. What she does want to do is build her credit history and enjoy some of the benefits of having a credit card such as cash back rewards for expenses she already makes such as tuition. I realize that there are many individuals who shy away from all types credit instruments - mortgages, credit cards, you name it.  That works for them, but plenty of other people including myself have taken advantage of the benefits of credit cards including but not limited to: building good credit history, earning cash back, and getting free auto coverage on rental cars.  Responsible credit card users don’t carry balance and use a credit card for convenience, not to borrow money.

Joan will be putting her tuition on the card, but her school only accepts Visa and Mastercard. I tend to think if you’re only going to have one credit card (and don’t shop at Costco), A Visa and Mastercard does make the most sense. They are mostly widely accepted with American Express coming in next, and Discover a good half lap behind that. Joan’s priorities in picking either a Visa or Mastercard should be:

  1. Cash Back Percentage
  2. Interest rate. Given that Joan is not planning to carry a balance, and I believe her, the interest rate shouldn’t be that important. However everything else the same, it’s still better to have a credit card with a lower rate than a high rate
  3. Credit Card Perks. Car rental insurance, travel insurance, special access, etc. Platinum cards generally have extra features.

I think the following three cards having pretty good reward programs. I’ve listed they payout percentages for each of the cards. Where I’ve included two percentages the higher percentage is for everyday purchases, gas and groceries. In the case of the Chase Freedom, it’s actually the top three most commonly used categories (amongst a predetermined list) whatever they may be.

  • Chase Freedom Visa, 1%/3%. The Chase Freedom is one my favorite credit cards and is currently offering a $50 signup bonus.
  • Capitol One No Hassle Cash Back Card, 1.25% - it’s actually 1% with a 25% annual bonus.
  • Citi Diamond Preferred MasterCard, <1%/<5%. The 5% redemption rate applies for the 1st 12 months. Technically this Citbank card is not a pure cash back reward, but a point card. The points translate roughly to something less than 1%/5%

Typically I would pick the Chase Freedom above the rest. The 3% cash back rate on the most common purchases is hard to beat. However because it’s likely Joan’s single biggest charge on her card will be tuition, getting a better payout in the form of the Capitol One No Hassle might make more sense.  In the end, any three of those credit cards should be good bets.
The cards below are interesting but because they offer slightly less flexibility than a reward card that can be redeemed for cash outright.

Because this is Joan’s first credit card, and may not have much of a credit history, it’s quite possible she won’t get approved for very much credit.  I’m hoping she get approved for enough so she can put her tuition on the card (and get a 1-2% effective rebate).  While having access to alot credit can be dangerous, building a good credit history is a great reason to get a credit card.