Best credit card for millennials? Experts weigh in

The Chase Sapphire Reserve, an aspirational surprise hit, has gotten press for its popularity among millennials.

But what’s really the best credit card for this generation? We asked five experts for their millennial credit-card recommendations.

Chase Freedom Unlimited (no annual fee) – Rahimul Taher, financial planner

With no annual fee and a steady rate of 1.5 percent cash back, this card is both low maintenance and lucrative for millennials.

“If you had to have just one credit card to keep things simple, this is it,” Taher says.

The best part? The card’s sign-up bonus is appealing to both low spenders and high-rollers, as it doesn’t have a spending requirement of thousands of dollars.

“For millennials who don’t spend much, this is a deal that can benefit most income levels,” Taher says.

Cards millennials should avoid? If you’re a low spender, steer clear of travel/dining cards with annual fees, such as the Chase Sapphire cards, Taher advises. When it comes to the rewards earned, you’d have to spend thousands extra on the $450-a-year Chase Sapphire Reserve to surpass the return you’d earn on the no-annual-fee Freedom Unlimited, per Taher’s analysis.

“Don’t get swept up by the one-time point bonuses,” Taher says. “Examine the long-term viability of the cards you get.”

Chase’s Southwest credit cards – Lyn Mettler, founder of Go to Travel Gal

Chase’s Southwest credit cards are compelling for millennials, Mettler says, because they help earn a sweet benefit — the Southwest Companion Pass.

“I am a big fan of the Southwest Companion Pass, which I’m not sure many millennials are aware of but they should be,” Mettler says.

The Companion Pass can be yours after you earn 110,000 Southwest points in a calendar year, and it’s good for the remainder of the year you earned it, plus the following calendar year. Once you’ve earned it, you can choose one person to fly free (well, for $5.60 in taxes one-way) with you.

“For millennials who want to increase their travels, but don’t have the budget, the Southwest Companion Pass can eliminate the cost of flights in the U.S.,” Mettler says.

Here’s where the credit cards come in: Points earned with the Southwest credit cards count toward the 110,000-point goal. That includes points earned with the sign-up bonus, which can get you most of the way to the companion pass. Mettler offers a step-by-step guide to quickly earning the companion pass on her site.

“My family of four flew to six different U.S. destinations, including Denver, Orlando and San Diego, using points along with the Companion Pass, paying less than $100 per flight for all four of us out of pocket,” she says.

A close second: Mettler also likes the Chase Sapphire Preferred for millennials, due to its flexibility. You can transfer points to hotel and airline programs (including Southwest), and Mettler also notes its relatively low fee of $95 (waived the first year), waived foreign transaction fees and ability to earn bonus points on dining and travel.

A card that offers flexibility – Ricardo, blogger at PointsFitness

It’s hard to pin-point the ideal card for the entire generation, Ricardo says. But it’s possible to pin-point the perk millennials should look for in a card.

“What millennials really need is flexibility,” he says.

So how do you know if a card is flexible? One good indication is a transfer program. Chase Ultimate Rewards, Membership Rewards from American Express (a CreditCardForum advertising partner) and Citi ThankYou allow you transfer points to various frequent-flier and hotel-loyalty programs. These programs also allow for in-program redemptions (merchandise, cash back, travel purchased via their travel portals, etc.)

This wealth of options allows cardholders to experiment and learn how to maximize rewards without being trapped by a card with limited options.

“Folks that aren’t very familiar with travel rewards won’t know how to strategize adequately so these cards allow room for error,” Ricardo says.

Many flexible travel rewards cards do have higher annual fees. However, many pricey cards “have ways to largely, if not completely, offset the fee,” Ricardo says. Ricardo, for example, has gotten more value out of the Platinum Card from American Express (a CreditCardForum advertising partner) than its price tag.

Cards millennials should avoid? While any card could fit your lifestyle, millennials should be cautious of airline and hotel co-branded cards because they often lack flexibility.

“These are the most rigid travel cards because you can’t easily transfer the points/miles you earn to different programs, if needed,” Ricardo says. “So if you don’t have a clear airline or hotel of choice yet, or if you’re not certain of your future travel plans, don’t apply for co-branded card, even if there’s an increased sign-up bonus. You might get stuck with miles in a program that later on you don’t need.”

Citi Double Cash – Lance Cothern, founder of Money Manifesto

If you can commit to never carrying a balance on your card, this could be the card for you, Cothern says. You’ll get 1 percent cash back when you make a purchase and another 1 percent back when you make a payment.

The beauty of this card is its simplicity.

“There are no rotating categories to keep up with and you can get your cash back as a statement credit or direct deposited into your bank account,” Cothern says.

And what you do with your accumulated cash back is up to you. You could use it to pay for a vacation, pay down debts, splurge on things you otherwise wouldn’t be able to afford and any number of things millennials might like to do if only they had a little extra cash.

Cards millennials should avoid? If you do need to carry a balance, avoid cards like the Citi Double cash – and other cards like it.

“Millennials that do carry a balance on their credit cards should completely avoid cash-back and rewards cards since they usually come with higher interest rates,” Cothern says.

Instead, go for a card with a low interest rate or an introductory 0 percent APR on purchases or balance transfers.

Whatever works for you: Lisa Rowan, personal finance expert at The Penny Hoarder

Young credit-card users have so many choices – and many of those choices could be a good fit, depending what stage of life they’re in.

“Think about your financial goals before choosing a credit card type,” Rowan says. “If you dream of traveling the world on points, then, of course, get a credit card that helps you earn toward trips. If you’re looking at getting your very first credit card, consider a card with a lower interest rate, but fewer perks, to build credit wisely.”

The point is to find a card that fits you, rather than a card being marketed at you.

“It’s definitely worth doing your research instead of responding to the first prequalified offer that shows up in your mailbox,” Rowan says.

Cards millennials should avoid? The old rules used to be to avoid annual-fee cards. But really, Rowan says, the enhanced perks on annual-fee cards, including rewards, airport-lounge access and more, might benefit certain millennial cardholders.

However, these perks are worth paying an annual fee for only if you’re not piling interest on top of it. If you want to carry a balance, avoid cards with annual fees.

“Why would you pay someone for a credit account you’ll be paying interest on if you don’t pay your balance each month?” Rowan says.

The responses below are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser's responsibility to ensure all posts and/or questions are answered.

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