Introduction to US Credit Cards (2): Elementary Cards

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I’ve introduced some elementary factors in the previous post. And this post is the actual beginning of guide of shopping using credit cards. Let’s apply for credit cards and start shopping!

1. Selection of Elementary Card

As mentioned in the previous post, you will start building your credit history only after you get the first credit cards, no matter you have a SSN or not. Thus, you should be careful enough for selection of the first card, which is the very beginning of your credit history. You cannot cancel that card (at least, I strongly recommend you not to cancel the first card). But you have only a few choices for the first credit card, for your credit history is totally blank at that time. Generally speaking, you can choose from following kinds of cards: Discover, Getting Cards by large deposits, Citi Student Credit Card, and Secured Card.

1.1. Discover It

It’s easy to apply even for newbies with no credit history~ Discover It is a cashback card. click the link above for more detailed information of this card.

Then, what is the good of cashback from the card? Of course, you can directly make it in your card as the statement credit, or let the bank send you a check so you can save at other banks. But a more valuable usage of the cashback is to exchange for gift card. There are always offers like $25 gift card for $20 cashback, and $50 gift card for $40 cashback at official website of Discover. This way, value of cashback rises.

It is worth noting that price protection of Discover is pretty good. Some people have made an in-advance snapping up on Black Friday with this policy — buy what you want at normal price and argue for a price match when price of the product falls on Black Friday.

With so many benefits, does this card have some shortcomings? Actually, it is fundamentally flawed: low credit limit! Generally, if applied as the first credit card, the credit limit if this card is always only $500 or $750 — even not enough for a new iPhone. Although the credit limit will be increased automatically after six statements, it’s always 500 to 750, 750 to 1000 or so. Some people still only have a credit limit of $1k after keeping this card for as long as 2 years. And the bank may do a Hard Pull when you request a credit card increase. After all, don’t worry~ After keep this card for a while, you will be able to apply for other cards which is more generous about credit limit.

1.2. Getting Cards by large deposits — Chase FreedomBoA 123

In short, it means that you open a checking account at the bank, then save lots of money in the account ($10k at least), and request the banker for a credit card. This usually works at BoA and Chase. As to BoA, the first choice is the cash reward card, called 123 for short. And Freedom card for Chase.

I will talk more about Freedom here. It is one of the awesome card with no annual fee.

Many people take Freedom as the first card, because we can get it by large deposits. Generally, if you have large deposits, the bank will give you a special consideration form when you apply for credit cards. This form is very useful for ones with no or short credit history to get the Freedom card. It has worked for those without SSN in the past. But Chase have just changed policy recently — they won’t carry out special consideration for those without SSN any more.

For those who want to apply for Freedom through normal process, I recommend you to do this after you have 9 months’ credit history.

1.3. Citi Student Credit Card

For this part, please see “Citi ThankYou Preferred Card for College Students“.

1.4. Secured Card

Secured card is the card you get with some deposits in the bank beforehand. And after keeping this card for a while, you can get your deposits and transfer the secured card to be a normal card. Secured card is not bad as the beginning of your credit history, since lots of people fail to get a Discover card, and Chase stop offering special consideration for those without SSN.

As for the secured card, I recommend secured card of BOA and Capital One for you. That is because these 2 banks are larger than others which offer secured card as well. Notably, 123 card and secured card of BOA don’t require SSN for applicants. However, considering that many cards are hard to get without SSN, I strongly recommend you to get one by maybe working in the canteens or some other ways.

Again, I stress it for the last time that DO NOT cancel your first credit card, even if it’s a secured card, you can do a product change after using it for a year or so (product change won’t harm your credit history).

2. Shortcut to high credit limit — American Express

After getting your first or, if lucky enough, second credit card, there’s only one thing you should do — build up your credit history. That’s pretty easy to achieve by following two principles — keep timely payments and low utilization rate (<10%). You need to non-stop repay for the card to keep low utilization rate because of the relatively low credit limit at the very beginning. After conscientiously using it for about half a year, you can start applying for new cards. Here I strongly recommend you to apply for cards of American Express at first. There are mainly two reasons for this:

  1. AmEx cards are easy to get approved and likely to give a high credit limit!
  2. You can easily find some great sign-up bonus for the first AmEx card.

Firstly, why am I always stressing the high credit limit? It is because that you don’t need to non-stop repay for the card to keep low utilization rate if the credit limit is high enough. And it’s very difficult to apply for the high-level cards (like Visa Signature card whose starting credit limit is 5k) if there is no high credit limit card lasting long enough in your credit report.

Secondly, you can go for the post “How to get the best Amex Sign-up Bonuses“. I strongly recommend you to apply for AmEx card only if you have got some good offers.

Some may ask:” Now that you don’t have a high credit limit card, why should AmEx approve you a high credit limit card? Actually, some get only 2k to 3k credit limit for the first AmEx card, which is far from the requirement of Visa Signature, 5k (There are also someone who get 10k credit limit for the first AmEx card. Mine is 7k, very surprising). Now I will show you why we need an AmEx card when we don’t have a high credit limit card: Although the starting credit limit is relatively low, AmEx have a awesome policy — 3x Credit Limit Increase (CLI).

This policy is very simply: after receiving card (after several months’ using is better), you can request a credit limit increase (soft pull for this), which will very likely to increase to be 3 times of former credit limit (which means you might jump to 9k credit limit from the former 3k credit limit). That’s really awesome.

You can find detailed approach in this post.

How to request a credit limit increase? It’s pretty easy: first, get into the E-bank page and click the question mark on left of “Available Credit”; then you will find the “request credit line increase” below. Be sure the number you are required to fill is ‘increase xxx’ or ‘increase to xxx’ at the “request credit line increase” page in case you fill the wrong number. So called 3x means that you can request to increase your credit limit to 3 times of the previous limit. Notably, there is a limit of the number and credit limit of AmEx credit card hold by individuals. One can hold 4 credit cards at most (charge card and business card are not in count). And when credit limit of a single card reaches 25k or the total credit limit reaches 34.5k, AmEx will very likely request for a financial review, which means they need to check your financial state and tax table to verify if you exaggerated your annual income while applying for cards and requesting credit line increase. During the financial review, all your cards are invalid. And if you fail to pass the financial review, your cards will be cut down credit limit, or even be shut down. So, think about the final credit limit you want. If you have a credit limit more than 5k already, my proposal for you is to request credit line increase to 10k to 20k, which is either below the 25k for single card, and leave some space for other AmEx’s cards which might be applied for in the future.

When you have a AmEx card, AmEx will do soft pulls from Experian credit bureau from time to time, and determine whether your request for credit limit increase can be directly approved through result of the latest soft pull. So we’d better use card conscientiously, keep timely payments and low utilization rate, and not apply for new cards during this period. I have seen others’ request for credit line increase failed because of too many hard pulls done for application for other cards.

3x CLI is relatively easy to pass if you don’t cross the line. If not directly passed, you will get a reply like “reply in 7 to 10 days”. Don’t worry, just wait for several days. If the credit limit still keeps unchanged, you can call and communicate with the customer service of AmEx.

There would be 6 months interval between two credit line increases. And next time you can still request for a 3x increase within the limiting of AmEx.

So which AmEx’s card to choose as elementary cards? Just apply for those offering great sign-up bonus, as we discussed previously. There might be some problems about applying for AmEx card, and some questions might already be answered in AmEx FAQ~


P.S.: Here is the list of posts in this series:

  1. Basic Credit Cards Knowledge
  2. How to Choose a Beginner’s Card
  3. Introduction of Common Cards and Combination, including Grocery Credit Cards, Airlines Credit Cards and Hotel Credit Cards
  4. Some Suggestions, such as How to Avoid Card Closed due to Exceeding Bank’s Bottom Line

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