What's a good card for somebody starting out?

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7055
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What's a good card for somebody starting out?

Postby 7055 » Sun Feb 09, 2014 6:54 pm

Just graduated college and want to start building up my credit. I've been getting these applications in the mail for a Discover card and I thought it looked pretty attractive because it gives you your FICO credit score on each statement for free. Generally don't you have to pay to get your score? It also offers 5% cash back on certain categories and 1% cash back on everything else.

Anyway I was wondering what you guys thought of this card and if you had any recommendations for which card offers the best rewards. As I understand Discover is not accepted in as many places as Visa/Mastercard.

Couple questions though:

Can somebody explain what APR is?

Also how does a credit card company make money, especially if they give cash back? Assuming I pay all my bills on time, wouldn't they be loosing money off me?


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Snowman
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Postby Snowman » Sun Feb 09, 2014 9:59 pm

Hi 7055,

Yes, typically the Myfico website sells you a credit score, but you typically need at least six months of history before a score can be generated. I do have a Discover card (I have the More card. But I'll change to the IT soon.) Discover has excellent Customer service, but are incredibly stingy with CL's.

APR- Annual Percentage Rate. It's basically determines your interest rate that you pay if you dont pay your statement full and carry a balance unless the card has an introductory 0% offer. Depends on your credit.

They make money on the swipes that you do so they get a percent of the sale. I.E. If you buy something at the grocery store with a credit card, the store will pay AMEX or whoever a fee in order to use the card at the store. Other ways- Annual fees, interest, etc.
Bank Of America: BankAmeriCard Cash Rewards-4.2k
Citi: Forward-4.5k American Airlines Advantage Platinum Select World Elite MasterCard 9/6/15-4K
Discover: More-7k
Amex BCE.2k- Amex SPG-5k
Chase: Freedom-5kSouthwest Rapid Rewards Plus- 3.6k
Capital one: Venture one-10,000, Visa Signature.

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Vattené
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Postby Vattené » Sun Feb 09, 2014 11:12 pm

I'm in a similar situation (just graduated college and wanted a major credit card to build up a good credit score) and I just applied for the Discover IT a few days ago. I've been approved, but haven't received the card yet so I can't really say much about it at this point. I chose it because I thought the rewards offered were very competitive and the FICO score is a huge perk. If you google "Discover IT card review" you will find a review of it on this site and a link you can follow to an application where you can get a $150 bonus if you spend $750 within the first three months you have the card (you have to follow the link; if you go directly to the application on Discover this is not offered). Another HUGE perk as even among cards that offer this sort of bonus, $150 is pretty high.

Another I considered was the American Express Blue Cash Everyday card. It offers 3% cash back on grocery store purchases, 2% cash back on gas station and department store purchases, and 1% on everything else. The Blue Cash Preferred card offers better terms (I believe 6%, 3%, and 1%, respectively) with an annual fee of $75. Whether that is worth the fee is a calculation only you can make based on your projected spending. From what I gather it is generally more difficult to get approved for American Express, but be aware that this is just a broad generalization.

Another one of the biggest contenders for me was the Capital One Quicksilver card, which simply offers 1.5% cash back on everything. This may be a big plus for you if you don't want to worry about signing up for categories every quarter as well as if a particular merchant qualifies for a category of rewards. This is a Visa card, so it is more universally accepted. I also understand Capital One is much more likely to approve people with limited credit histories. If this is your first card of any kind, that may be a significant factor.

Credit card companies make a huge amount of money off of the fees Snowman mentioned. I believe they can make as much as 3% off of internet sales! I've always been the type to never carry a balance on a credit card, but I must assume there are plenty of people that don't and therefore make credit card companies a lot of profit as well - which balances against the customers I must assume are the kinds of people that frequent this forum and lose them money.

Good luck on the card search!
-Vattené
FICO-8: EX - 827 (5/17) | TU - 824 (5/17)
My Cards: Barclay Arrival+ | Discover it | Amex ED
AU:: Discover Miles | BofA BBR | Barclay Commence (SD'd)

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Snowman
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Postby Snowman » Sun Feb 09, 2014 11:21 pm

Vatene- If your credit is good, then only thing thing you need is good AAOA and income with no missed payments. If you have that, every creditor will approve you. Hell I'm 20 years old and make 15k a year but my credit has been pretty good getting me some good CL's. Patience and experience will get you the right cards. For Amex, the BCP and SPG IMO, are the two revolvers that are harder to be approved for, and as for charge cards only the Centurion is hard to get. Beyond that, the rest of the Amex cards are easier. IMO, actually Chase is harder to be approved for and maybe even Penfed...

Also, you have to remember that CC's make money through different ways. Swipe fees, people paying interest, Annual fees, can up it. People PIF cost them money, but are typically the lowest risk. I remember reading somewhere that the main reason why underwriters almost always approve people who PIF is because there is no risk with them as well as they are treated very well by CC's. If you carry a balance-well you are only increasing their bottom line even more. Only time I carry a balance if there is a 0% offer, or I have something like tuition or school to pay for. Beyond that, I PIF always.
Bank Of America: BankAmeriCard Cash Rewards-4.2k
Citi: Forward-4.5k American Airlines Advantage Platinum Select World Elite MasterCard 9/6/15-4K
Discover: More-7k
Amex BCE.2k- Amex SPG-5k
Chase: Freedom-5kSouthwest Rapid Rewards Plus- 3.6k
Capital one: Venture one-10,000, Visa Signature.

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Vattené
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Postby Vattené » Sun Feb 09, 2014 11:46 pm

Snowman - Thanks for the info! I threw that out there just because I see it repeatedly on forums like these: people seem to worry a lot about whether they will be approved (of course I realize many of them may have bad rather than just thin credit profiles), and I have no idea what incomes different credit card companies require (which may be a big hurdle for someone that just graduated college). I just recently felt the urge to apply for a major credit card. I have a few in-store cards (the Comenity cards with horrible terms) to build a credit history, because I would always PIF anyway, and because you often get a discount for applying. I just wasn't interested in a major credit card to use for benefits until recently. Prior to that, I always held a bad connotation of credit cards and would mentally tune out any ads and offers, treating it like spam. I'm looking forward to using a card with better benefits now, though!

Aware of the different ways they make money, I mainly just wanted to point out the "swipe fees" as many people don't seem to be aware of this. Particularly, I wanted to bring up the fact that credit card companies make as much as 3% off of internet transactions. I found that shocking when I learned it. I think that is just insane, particularly given the profit margins of a company like Amazon or Walmart.
-Vattené
FICO-8: EX - 827 (5/17) | TU - 824 (5/17)
My Cards: Barclay Arrival+ | Discover it | Amex ED
AU:: Discover Miles | BofA BBR | Barclay Commence (SD'd)

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Snowman
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Postby Snowman » Mon Feb 10, 2014 12:17 am

Vattene- Well it depends. All companies love people with higher incomes. AMEX typically targets the well off, hedge fund owners, bankers, etc, and then there are us regular people who have good credit that they have extended credit to as well. All companies care about income but if your credit is good with no major issues, then the vast majority will approve you (penfed seems to be the exception as they can be PITA as many people here have experienced.) I never wanted any store cards...I've preferred major ones tbh. If used correctly, Credit cards can be like a gift from heaven, if not...your SOL.

Yeah the swipe fees are crazy. At my office (the owner also owns some subways and IHOPS, the fees can be pretty high...I work with the real estate group...but I'm pretty much assigned running around everywhere helping anyone who needs something.) But literally their high. Visa, IME, is usually getting the lion share of the fees since they are the largest branded card company out there (meaning their logo is on the vast majority of the cards) while Master-card is slightly less. The reason why Amex charges quite a bit in merchant fees is because it convinces the merchant that their cardholders are typically more upper-class and well off, thus they will spend more, and therefore Amex will take more swipe fees. Take Costco for example. The reason why Amex is accepted at Costco exclusively is because Costco sells things in bulk and sells them at a slightly higher price then everyone else (but they have the better quality in terms of what you can buy there which is why I myself have a Costco membership-They have quality products for the most part compared to Walmart and Sam's club). So Amex comes in and basically tells Costco to accept our offer because our card-members will spend more here and since they do Costco profits in terms of getting the sale and revenue while the more Costco sells the bigger the fees that Amex will rake in. Same thing with Amazon. Amazon is a Internet Mall that sells everything one can dream of, and the CC's know this and since people buy things in bulk or spend a good sum of money there, they'll make more in fees. Oh and I forgot Discover, Discover is starting to become more accepted as well but they too charge fees that rival Amex, and many do not want to accept it. Example, small merchant is selling clothes. If Visa is charging 3% and Amex is charging 5%, Discover will be around 4%. That's really it....at least that's my theory.
Hopefully it makes sense what I'm saying :) .
Bank Of America: BankAmeriCard Cash Rewards-4.2k
Citi: Forward-4.5k American Airlines Advantage Platinum Select World Elite MasterCard 9/6/15-4K
Discover: More-7k
Amex BCE.2k- Amex SPG-5k
Chase: Freedom-5kSouthwest Rapid Rewards Plus- 3.6k
Capital one: Venture one-10,000, Visa Signature.

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Postby JoDa » Mon Feb 10, 2014 6:04 am

It really depends on what you want out of the card. Discover has been offering some very attractive rewards lately, but don't plan on being able to use the card outside of the US or with smaller retailers. BOA is starting to get into the rewards game on their fee-free options, though I can't speak much to their minimum quals (I've had my BOA for-ever, and they've just started soliciting me for the fee-free rewards cards now that my credit hovers in the very high 700's with a robust income that they know about because I have that card AND they had my mortgage until 6 months ago). Chase has all the good rewards Visas. Their standards strike me as high-ish (while this was a couple years ago, they started my UMP at $1500 with a $65K income, just over 700 score, and a desirable DTI). BUT they were generous with CLIs when I asked for them after a time of behaving responsibly, and then started giving my auto CLIs.

From my experience, if you plan to travel abroad, Visa is your best option. Even if you get better rewards from someone else for most of your domestic use, try to get a Visa if you plan to spend much time abroad. Discover is pretty much so a no-go outside of the US. Master Card will usually work in major destinations, particularly in the US and NA, but is less accepted in smaller or more remote locations. Amex plays like they're a world-wide card, but they're a solid second-fiddle if you're traveling off the beaten path. The ONLY cards I've been able to whip out reliably have been Visa. Now, I'll admit I don't have an Amex, but I *can* see the "we welcome {X} credit cards" stickers on the door. If your foreign travels will consist of major shops and hotels in places like Paris and Mexico City, Visa, Master Card, and Amex will work. If you might find yourself bumming around on the beach (or worse, WORKING) in Danang, Vietnam, Visa is your best friend.
CSP $19K
BOA $4K
UMP $11.5K
Target Visa $1.5K

MemberSince99
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Postby MemberSince99 » Mon Feb 10, 2014 6:32 am

Danang Vietnam is where the hooker in Full Metal Jacket says "hey you got girlfriend Vietnam?" and "me love you long time".

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Postby takeshi » Mon Feb 10, 2014 7:50 am

7055 wrote:Anyway I was wondering what you guys thought of this card and if you had any recommendations for which card offers the best rewards.

Best is always highly subjective, regardless of topic so be very clear on what you specifically mean by best. What are your major spend categories? 5% is great in general but 5% in a category where you don't have much spend isn't anywhere near as useful as 5% in a category where you have a lot of spend.

For me there isn't just one card that has the best rewards and that's why I have a number of cards. Discover was the last card I added to my wallet as I wanted fixed category cards for my major spend before getting rotating category cards. YMMV. Give us something to work with.

Snowman wrote:Vatene- If your credit is good, then only thing thing you need is good AAOA and income with no missed payments.

If one's credit is good it's likely that AAoA and payment history are good since they factor into one's credit.
http://www.myfico.com/crediteducation/whatsinyourscore.aspx

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Vattené
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Postby Vattené » Mon Feb 10, 2014 6:46 pm

Snowman wrote:Hopefully it makes sense what I'm saying :) .
That absolutely makes sense, yeah. I've wondered why Amex has that partnership with Costco because Amex so heavily brands itself as being a card for the elite, high net worth class. I also always assumed Costco was basically like Sam's Club (I'm a member at a Sam's; Costco isn't an option where I live). While some people do use it for small businesses it's still very much a big box-style "discount" store. At least Sam's is, but you make it sound like Costco might be a notch above Sam's.



Snowman wrote:Well it depends. All companies love people with higher incomes. AMEX typically targets the well off, hedge fund owners, bankers, etc, and then there are us regular people who have good credit that they have extended credit to as well. All companies care about income but if your credit is good with no major issues, then the vast majority will approve you
I think it's been established I don't really know what I'm talking about (hence trying to keep responses in terms of my experience), but I imagine they still make money off of the people that PIF. The interest income suffers, but I would bet they still profit off of us (though perhaps at thin margins) just from the transaction fees they collect from merchants.
-Vattené
FICO-8: EX - 827 (5/17) | TU - 824 (5/17)
My Cards: Barclay Arrival+ | Discover it | Amex ED
AU:: Discover Miles | BofA BBR | Barclay Commence (SD'd)



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