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Reader Amber sent me this e-mail, and I thought it would be a great question to through back to all you knowledgeable readers. Here you go:
Hi Jennie! My husband and I are both pretty young and we have a goal of buying our own house someday. We would love to pay cash, but in case we are not able to do that we still want to make sure that we have strong credit scores. To help with that we would like to get a credit card which we can use and pay off each month. I was wondering if you or any of the other Bargain Blessings readers could suggest a credit card that has a really good rewards program. Thank you for your help!
I’m going to jump in here and say that I am a big fan of Discover Card’s cashback program. I’ve been able to hear hundreds of dollars of free gift cards by using my card each month and paying it off. What cards do you all have and what do you/don’t you recommend for Amber?
SillySimple says
I have had the Chase rewards Visa for years now. It has taken on several forms over the years and now it is the “Chase Freedom” card. 1% cash back on every purchase plus bonuses for purchases, they also have quarterly shopping categories that get higher rewards.
My husband and I are pretty disciplined spenders to begin with. I like to use a credit card for most daily expenses and then pay it off at the end of the month. I like the protection that the line of credit and Visa’s credit protection provides. If your card gets stolen and someone racks up huge bills with it, the $ doesn’t come out of your checking account it comes out of some unseen line of credit and then Visa credits the card back as part of their fraud protection.
It paid off for us, when right as we were getting married our online travel agent had a “technical issue” and charged our honeymoon to our credit card multiple times for the same trip. If that had come out of my checking account that would have been really really bad (the other checks I wrote for the wedding would have bounced), but because it was my credit card I just had to call up Chase and dispute the charge.
Tanya says
We love our Chase La Quinta card because we travel frequently to visit in-laws and our points build up quick. We use our points/free nights when we go on vacation elsewhere and have a whole weeks stored up! Chase/Southwest airlines have a similar program if you are a traveler.
On another note, I once borrowed $3,000 loan from a bank in anticipation of paying my dad for a vehicle. He then refused the $ because of the high interest rate. So, I repaid the loan right away (plus a few bucks in interest)… and my credit score sky-rocketed! Maybe all you need to do is go get a loan from a bank and pay it back in two weeks without spending the $$$. They will never know 🙂 and it’s legal 🙂
hannah says
I would actually advise this young lady to talk to her banker about the best ideas for building a credit score, if her banker is anything like ours – very helpful!
From talking with OUR banker, I know that to get a good interest rate on a mortgage, you need a well-rounded credit score.
In fact, aside from just getting a mortgage, a credit score impacts many areas of your life – even your career!
So, getting a credit card is an important first start, but there are other things you should look at too, like different types of loans.
My husband had an awesome credit score, but when he went to get a car loan, he had a very difficult time getting one because credit card history was the only type he had in his report.
Banks and lenders view credit cards as revolving credit, which is, obviously, a totally different type of credit than that needed to get a mortgage or a car loan.
So for the other types of loans, one way is to take out a small bank loan and pay it off. You will pay some money in interest, but you will help to round out your credit ‘ portfolio’. Again, something to talk to your banker about.
As for a credit card, some things that affect your score are a) how long your account has been opened b) what % of your limit you are using c) are your payments on time.
Because of this, its important to open a credit card account early and keep it open. Don’t close it when you no longer want it, but just use it every now and then. This will help establish a long history of good behavior.
As for now, one way to use your card without having to think about it is to put monthly bills on it, such as your cellphone or internet bill. Just remember to read over those bills anyway!
For a credit card, my husband and I have been more than happy with Bank of America’s credit card. It offers the standard 1% cashback, and sometimes 5%, and we’ve been able to cash out points for credit or $25 cards.
Good for you though for trying to save up and pay with cash!
Melissa K says
This is great advice! I will also add that you might consider having at least 2 credit cards, as that will help the score and also give you options on the type of cards & rewards you earn. However, be sure and pay them all off IN FULL every month to help your credit score even more.
Melissa K says
Also, I would recommend NEVER having a credit card that has a yearly fee! There are too many good free credit card options out there to warrant PAYING for one!
Amy says
We are big fans of our Citi Thank You card and charge everything we can on it every month (and pay it off). We chose it because of the low annual fee ($50) but now that’s gone up to $75. And we don’t get cash back, just Thank You points, but we were mainly interested in using the rewards program for travel and this let’s you book any airline/hotel via an Expedia-like portal, versus something like the AAdvantage card where you just earn miles on American. I did the math and it’s basically equivalent to 1% cash back if you use points to book a trip or buy something directly (we ordered our BOB duallie stroller on thankyou.com). But if you buy gift cards or Visa (cash) cards the payback is even less than 1%.
Sorry, that was long winded. I really wanted to ask what everyone’s annual fees are on their cards.
Elizabeth says
I don’t know that any kind of IRA builds your credit score, or does it?
I have a Discover card and always sign up for whatever category has bonus savings each month. I also have a rewards Visa card from my bank (Wells Fargo) that I use at places that don’t take Discover. I use the Discover awards for home improvements and the Visa awards for fun things, live movie tickets.
Sally Hanson says
The Discover Card cash back program sounds pretty good, but I actually wanted to take this into another direction… have you thought of opening up a Roth IRA? You can withdraw up to $10,000 of your Roth IRA retirement earnings penalty free to help with the cost of buying your first home. There are other things to this as well, but it might be worth something to consider.
Deanna says
I’m with you on the Discover Card cash back program. We were even able to “buy” a 32GB iPod with our rewards money after just a few months. Not only can you get cash back from B&M store purchases, but even higher rewards from numerous on-line stores by shopping through the Discover Card website.
Sarah says
We have AMEX Gold and use it for almost everything we buy. We have the one you have to pay off each month. However, I don’t recommend AMEX to Amber because many places don’t take it. Most of the small businesses in my town don’t take it. I recommend checking into Visa or Mastercard because they are accepted almost everywhere, so you can maximize your points or cash back. Also, we don’t get cash back from AMEX, but we earn tons of points and I “buy” gift cards to Kohls or Home Depot with the points, since we almost always need items from those stores.
Jessica says
We like our Costco Amex. We earn 1-3% cashback on our purchases, with no limit. But, of course, have to be a Costco member.
Stacy N says
We like Citicard. It gives you 1% on everything and then 5% on select other categories each quarter, up to $300 per year. Plus if you purchase in their network you can earn additional $.
JoAnn says
We love Citicard too. We just paid for part of our mortgage with our reward points. Plus you can get gift cards to lots of different stores.
Melissa K says
We have Citicard as well. Whenever we hit our $300/yr reward limit (it comes in the form of a check by the way, so you can use it on whatever you want), we just switch to using our AMEX after that for the rest of the year & earn Skymiles for Delta flights. My husband just flew for free to France & back on those Skymiles!