Credit cards to apply for after starting your first job

So you’ve just started your first job. Congratulations! With your new source of consistent income, you’ll want a good credit card to help you save money on your everyday spending.

Do you have a credit card from college? Many college students will have a Discover it® Student or Discover it® Chrome Student credit card, since that’s such a popular starter card. Some may have been fortunate enough to get a better card, such as a Chase Freedom Unlimited.

However, once you start your job, it’s time to get yourself some better credit cards. Your new income can afford you cards with better benefits.

Quick words of caution

Before reading this article, it’s important to keep a few things in mind.

First and foremost, you should check your credit score before applying. You can check it for free at Credit Karma (creditkarma.com). If it’s under 750, consider applying later. Additionally, read the advice that Credit Karma gives you to raise your score. However, if it’s above 750, then proceed to read the rest of this article!

Secondly, absolutely do not carry a balance on your credit cards, ever. The interest rates on credit card debt are sky high and will cause you to enter an endless cycle of credit card debt.

Thirdly, just because you are moving on to better cards doesn’t mean you now have to cancel the old cards. In fact, you shouldn’t cancel your old credit card account because it will lower your overall credit line and lower the average age of your credit cards. Those two things are bad for your credit score. Keeping them open will actually help your credit score.

Lastly, don’t apply for too many credit cards in one go. My rule of thumb is: apply for one new card every six months. If you must apply for multiple cards simultaneously, you can apply for two at the same time, but never more than two within any 30 day period.

No annual fee cash back cards

Virtually every credit card in the U.S. offers at least 1% back on purchases. However, some of them offer more. The credit cards that offer more cash back typically fall into two categories: general-purpose cards and rotating quarterly category cards. Furthermore, almost all of them have no annual fees.

General-purpose cash back cards are easy to understand: a consistent baseline cash back amount that’s typically higher than 1%. My favorite all-purpose cash back credit card is the Chase Freedom Unlimited. Compared to other cards, it gives you a higher cash back percentage of 1.5%. While it’s not as high as the Citi DoubleCash’s 2% back on most categories, it does give you 3% on dining and drugstores. It’s a Visa, so you can use it at Costco (whereas the Citi DoubleCash is a Mastercard). If you have an iPhone and consistently use Apple Pay, then the Apple Card might be the move for you because it offers 2% back on all purchases made with Apple Pay and 1% for purchases made with the physical titanium Apple Card. (For select merchants like the Apple Store and Nike, that goes up to 3% back.)

There’s also the rotating quarterly categories cash back cards. These offer 5% back each quarter of the year on different categories. For instance, one quarter might give 5% back on gas, while another quarter offers 5% on groceries. The categories for a quarter are typically announced a few months before that quarter begins. Then, you can earn up to a certain amount of elevated cash back for that quarter. For college students, the most iconic example of this would be the standard-issue Discover it® Student card (not the Discover it® Chrome one). After graduation, it’s time to sideline that Discover card and go for something better, like a Chase Freedom Flex. It works pretty much like what was just stated, but with the extra bonus of 3% back on dining and drugstores, just like its cousin, the Chase Freedom Unlimited. For all other categories that don’t earn 5% or 3%, you’ll still get 1% back.

Choosing which works better for you ultimately comes down to your spending habits.

• If you just want a consistently predictable card for cash back, the Citi DoubleCash offers 2% back on every purchase.
• If you find yourself dining outside, going to drugstores, or potentially interested in applying for a travel credit card later, then go with one of the Chase Freedom cards. I personally think a Chase Freedom Unlimited is better than a Freedom Flex for your first card out of college, because this way, you will always get 1.5% back, rather than getting 5% for a few small things and only 1% back on the vast majority of your purchases.
• If you travel abroad often, consider a card with no annual fees that also doesn’t have foreign transaction fees, such as the Apple Card.

These cards will accumulate either literal cash back or points that are worth a certain amount. You can usually either cash out the cash back or apply it towards your next statement to save some money. For Chase, you earn points rather than cents, but each Chase point is worth one cent, so it works out to be effectively the same. (That is, unless you have a premium Chase card, but more on that later.)

Premium travel cards

On the other side of the spectrum are premium travel credit cards. They range from mid-tier to high-end, depending on the card’s annual fee and benefits.

Mid-tier cards

These cards are one step above a regular cash back card because they offer elevated cash back on categories like dining and travel, travel-oriented points redemption, and no foreign transaction fees, among other benefits. With reasonable annual fees usually between $75 and $250 (but most commonly set at $95), they are great choices for the average spender who wants more benefits for travel.

The Chase Sapphire Preferred is probably one of the most popular mid-tier cards out there. It offers 3% back on dining and drugstores (just like the Chase Freedom cards), 2% on travel and public transit, and 1% back on everything else, all with no foreign transaction fees. Then, these points can be redeemed for increased value on the Chase Travel Portal. Instead of being worth only 1¢, every point is now worth 1.25¢. The best part is, if you also have Chase Freedom cards, you can transfer those points to your Sapphire Preferred to redeem them for the higher redemption value. Or, you could transfer these points to a Chase transfer partner, such as Hyatt or United, which could potentially get you more value than even 1.25¢. (More on that in another post.)

Meanwhile, the American Express Gold Card is $250 a year but offers additional benefits that make up for its higher annual fee. It gives 4% back on dining and groceries, 3% back on airfare booked directly with the airline, and 3% back on all travel (including airfare) booked on the Amex Travel Portal. And just like the Chase Sapphire Preferred, you can transfer these points to transfer partners like Delta and Hilton. (Unlike the Sapphire Preferred though, you can’t redeem these points for more than 1¢ and spending them on the Amex Travel Portal will get you a valuation less than 1¢ per point.) It also comes with $140 of Uber credits annually and another $100 in credits to spend at other partners like GrubHub or the Cheesecake Factory, among others. That means the card essentially pays for itself, yet offers all of these benefits simultaneously.

These two cards are only appropriate for people who expect to spend a good amount per month and also will travel a decent amount, or at least wish to save money on traveling.

High-end cards

There are credit cards that have even higher annual fees and come with a ludicrous listing of benefits.

One of my friends had been considering a Capital One Venture X card for some time, even before I made his acquaintance. Ultimately, he decided to use it because of its 2x back on everyday purchases, 5x back on flights booked through the Capital One travel portal, 10x back on hotels and car rentals booked on that portal, and $300 to spend on the portal every year. The credit card’s annual fee is $395 a year, but combined with a 10,000 anniversary point bonus at the end of every year you keep the card open, the card essentially pays you $5 a year to use it.

The benefits don’t end there though. This card also comes with a Priority Pass to access airport lounges, access to the Capital One Lounges that are so far only available in DFW, and TSA PreCheck/Global Entry credit. The last major benefit is being able to add authorized users to the card for free so they can enjoy benefits like the Priority Pass, the TSA PreCheck/Global Entry credit, and access to the Capital One Lounge.

Ultimately, the Venture X made sense for him because he was going to spend the annual fee money on travel anyway. After getting approved for this card, he has made it his main card and earns thousands of points on it every month. My only reservation with the Venture X is Capital One’s limited redemption value of 0.5¢ per point, which effectively halves the cash back values mentioned above. However, if you use it to transfer to partners, it becomes worth it.

If you want even more benefits, then the two other high-end credit cards typically mentioned are the Chase Sapphire Reserve and the American Express Platinum Card. I wouldn’t recommend those two for anyone’s first card when they start a job though.

Picking a starter card

I typically recommend starting with a Chase Freedom Unlimited, or depending on your personality, the Chase Freedom Flex. From there, you can try going for a Chase Sapphire Preferred or American Express Gold Card, depending on your needs. If you really think you’ll be traveling a lot and spending a lot of money, then the Venture X may be worth the risk, but I wouldn’t recommend it to everyone.