If you live in the U.S, using credit cards is both a fun and efficient way to earn rewards while spending money that you would’ve spent anyway! By spending a little bit of effort on applying and using cards, it’s very simple to earn a round trip flight to China or other countries. If you adopt credit cards and travel rewards as a hobby and dig into it, you can experience many of the finer things in life; first class air tickets, five star hotels, and airport lounges. However, there are certain rules to follow with credit cards. Applying and using cards without consideration could keep you from getting the best value out of credit cards and worse, it could even harm your credit score. This article aims to give beginners to credit cards a summarized tutorial. You can have a big picture from the beginning to avoid doing anything you might regret later. If you want to know more, please click the links for more specific topics.
I.How To Apply Credit Cards
0. Do I have to have an SSN (Social Security Number) to apply a credit card?
Nope, you can get many cards without SSN. Take a look of article Credit Cards You Can Get Without SSN if you don’t have one. The following sections assume that you have an SSN.
1. The first card
This first step can be a bit troublesome. Whether banks approve your credit card applications is mainly based on your credit history. Having an SSN is different from having credit history. You can only start building your credit history once you begin debtor-creditor relationships, eg. credit cards, car loans, home loans, etc. With a blank credit history, you almost have no chances to get any major credit cards. Only a few credit cards are considered to be suitable credit cards to apply for as your first. Don’t be too concerned about the signup bonus for your first credit card, it already means a lot to get approved since you can start building your credit history. Credit Cards For No Credit History introduced a few cards for beginners:
After getting the first card, it’s suggested to use it for 6 to 12 months. You should start trying to apply for other credit cards when you have enough credit history.
2. Chase 5/24
When you hold your first credit card for a while and enough credit history, you can in theory apply for any credit cards you want. However, most of the best Chase credit cards are affected by a special rule: Chase 5/24 Rule. This rule states that your application will be rejected automatically if you have opened 5 or more new accounts within the past 2 years, no matter how good your credit history is or how high your credit score is. Both Chase credit cards and credit cards issued by other banks are counted. Thus, if you want to get any Chase credit cards affected by the 5/24 rule, which we suggest, it’s better to start getting Chase cards while your number of accounts is under 5. Otherwise, you would need to wait a very long time to have the opportunity again. We strongly recommend that your 2nd to 5th credit cards be from Chase, especially the ones affected by the 5/24 rule. Here’s the suggested list:
- Chase Freedom
- Chase Freedom Unlimited (CFU)
- Chase Sapphire Preferred (CSP)
- Chase Sapphire Reserve (CSR)
- Chase UA Explorer
- Chase Southwest Plus
- Chase Southwest Premier
- Chase Marriott
Don’t rush too much during this period. Spend a few months to apply gradually, otherwise it can be easy to get rejected.
3. AmEx Platinum 100k Pre-qualified Offer
The 100k signup bonus of AmEx Platinum is a very special case. Normally the signup bonus is only 40k, it’s very rare to see 100k public offer. It typically disappears in one or two days if it appears. However, it’s common to see a 100k pre-qualified offer many times throughout the year. The general rule for AmEx pre-qualified offer is that, once you have any AmEx credit card, you are no longer eligible to see any AmEx pre-qualified offer (See details in How To Get the Best AmEx Sign-Up Bonuses). We strongly suggest getting the AmEx Platinum 100k before applying for other AmEx credit cards.
4. Other credit cards
After you manage credit cards mentioned above and you have more than one year credit history, you are much more flexible to apply for other credit cards. You can get one credit card when it has the highest signup bonus, or get one when you are planning to spend a lot so you could meet the spending requirement easily. The recommend card list is Best Rewards Credit Cards For Everyday Use and Best Credit Card Sign-Up Bonus (updated monthly). It mainly includes:
(1) Cashback / Points cards
- AmEx EveryDay (ED) or AmEx EveryDay Preferred (EDP) or AmEx Blue Cash Everyday (BCE) or AmEx Blue Cash Preferred (BCP)
- AmEx Premier Rewards Gold (PRG)（or other AmEx Charge Cards）
- Citi Prestige
- Barclaycard Arrival Plus
- BoA Better Balance Rewards (BBR)
- Merrill+ Visa Signature
(2) Airline credit cards
- Citi AAdvantage Platinum
- Barclaycard AAdvantage Aviator Red
- AmEx Gold Delta SkyMiles
- AmEx Platinum Delta SkyMiles
- BoA Alaska
- Chase British Airways
(3) Hotel credit cards
- Chase IHG
- Chase Hyatt
- AmEx SPG
- AmEx Hilton
- AmEx Hilton Surpass
- Citi Hilton
- Citi Hilton Reserve
- Chase Ritz Carlton
5. Credit cards not recommended
Some credit cards look good at first glance, but can be extremely terrible cards. All different kinds of Store Credit Card are in this category (e.g. Employees at Macy’s, Walmart, etc will ask you to apply for their credit cards for a better discount). Credit cards with Capital One and US Bank are also considered to be in this category. We strongly recommend applying for the cards listed above if your credit history is less than 2 years. If you already have most of these cards, then you can tailor your applications more based on your own demands and considerations.
Credit Report and Credit Score (mostly by FICO) are key factors in approval of credit cards. For credit cards owners, it is very important to know about their Credit Reports and FICO Credit Scores. Please refer to How To Get Free Credit Reports And Scores about how to check your credit store, refer to How To Improve Credit Score to learn about what affects Credit Score and how to improve it.
A common question for people who don’t know credit cards very well is: Will applying for a lot of credit cards make my credit score terrible? The answer is that it depends. For every new credit card you get, it surely negatively impacts your credit score in the short term: you get a Hard Pull (HP) and a new account with 0 credit history, so it’s not surprising to see a drop of the credit score. However, in the long term, the impact of a HP disappears after two years, new accounts gradually become old accounts, and your utilization goes down. All of these things may positively affect your credit score. If you control the rate that you get new cards very well, it’s possible to not only keep a good credit score all the time but also to have one that is much higher than people who only hold one credit card after 10 years. Of course, if you have plans to apply for a home loan in the near future, you will really need to consider the short term impact on new accounts. In this case, it’s better to avoid getting any credit cards for at least 6 months, and more likely for 2 years.
Another common question is that: after getting so many credit cards with annual fees, if we want to close the cards to avoid paying annual fees, will it make our credit score terrible? After the first year, you may not need to close a credit card with an annual fee since it might be possible to downgrade to other cards without annual fee. Also, the credit score model doesn’t directly consider closed accounts. Closing an account does not have a large direct impact, especially if you have a lot of cards without annual fees. Your credit score could be still good when you open/close cards with discipline.
III.How to use points
After applying for many credit cards, you will be receiving a plethora of bank points, airline miles, and hotel points. Normally within two years you can get a few hundred thousand or even a million combined points/miles.
Though we have estimated values for different kinds of points, estimated values are just that, estimates. In practice, it’s not a fixed rate. If you use points very well, the real value could be more than the estimated values. There are a lot of tricks about how to make the best use of these mileages and points.
1. Bank Points
Bank points mainly include UR, MR, TYP and SPG. Maximize Your Credit Card Points Values is a brief introduction on how to use these bank points. Basically, the best use of these points is to transfer them to a specific airline.Read individual guides for more details:
- Chase Ultimate Rewards (UR) How to Use
- AmEx Membership Rewards (MR) How to Use
- Citi ThankYou Points (TYP) How to Use
- SPG How to Use
2. Airline Miles
It’s not always required to redeem a specific airline award ticket with its own program. For instance you are allowed to redeem United miles on All Nippon flights because they are a partner airline. Each airline has its own rules to use miles. Although it increases the complexity of using miles, it also brings more opportunities to make better use of them. There’s no doubt that efforts need to be made to maximize value. Please take a look of our Airline Miles Guide. Here’s a few of the most common airlines along with some transfer ratios:
(1) Star Alliance:
- United Airlines (UA) Miles Guide (UR 1:1. SPG 1:0.5)
- All Nippon Airways (ANA, NH) Miles Guide (MR 1:1. SPG 1:1.25)
- Air Canada (AC) Miles Guide (MR 1:1. SPG 1:1.25)
- American Airlines (AA) Miles Guide (SPG 1:1.25)
- British Airways (BA) Miles Guide (UR 1:1. MR 1:0.8. SPG 1:1.25)
- Delta Airlines (DL) Miles Guide (MR 1:1. SPG 1:1.25)
- Flying Blue Miles Guide (UR, TYP, MR 1:1. SPG 1:1.25)
(4) Other airlines：
We made a specific tool called awardhacker, which shows clearly which airline costs the least miles from place A to place B.
3. Hotel Points
The best use for hotel points is simply to redeem them for Free Nights (FN). It’s relatively simple but there are still tricks. Please refer to our Hotel Points Guide.
Applying and using credit cards is a both money-saving and fun hobby. We wish everyone happiness in the journey with credit cards! If you have any questions, feel free to leave any comments below!