• Six simple credit card rules.
• My favorite credit cards.
• A head’s up on current credit card sign-up bonuses.

I’ll update this as necessary (about once a quarter). Enjoy, and if you have any questions about my views on anything credit cards post them in the comments.

Note: Credit card affiliates are one way this site makes money, so occasionally writing about them keeps the lights on. Most credit cards will pay me and other bloggers if somebody clicks a link on our site and successfully applies for a card. Because most banks do this, I don’t feel like there’s a conflict of interest recommending one card over another because one is an affiliate and one isn’t—but I want you to know and make that call. In this post, cards for which I have an affiliate relationship with are identified with a dagger symbol (†).

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TO START, SIX SIMPLE CREDIT CARD RULES

After five years of blogging, sometimes I feel like I write the same thing over and over again, but the good news is I’m now able to boil that advice down more and more. If I only had two minutes to sum up my credit card advice, this would be it:

• Do use a credit card. If you’re not in credit card debt*, use a rewards credit card for almost everything you buy. For one, if you can get between 1-5% back on stuff you buy, why wouldn’t you? Second, credit cards provide a convenient way to track everything you buy. Third, credit cards are safer and more convenient than debit cards.
• Pay off the balance every month, no exceptions. As somebody who has come back from the brink of financial ruin thanks to ridiculous credit card debt, I will never again use credit cards for things I can’t afford to pay off at the end of the month. So as long as you pay your credit card balance in full every month, the APR on the card you pick doesn’t matter (you’ll never pay a dime of interest).
• When in doubt, choose a cash rewards credit card. For the average spender, cash rewards credit cards provide the most bang for your reward buck. Two possible exceptions: 1) you’re hoping to bank miles for a pricey international airfare (in which case the miles you earn are worth more) or 2) you travel for work so often you can benefit from perks that come with mileage cards.
• Re-evaluate your card every couple of years. Credit cards are constantly changing their terms and rewards and, often, better cards are available to new customers. Banks frequently jack interest rates and even trim rewards programs on existing cardholders because they know most people are too lazy or ignorant to switch. Prove them wrong.
• Don’t cancel old credit cards automatically. When you get a new credit card, you may be tempted to cancel your old one, but don’t cancel that old card just yet. Old credit cards are good for your credit score, even if you don’t use them. Cut them up for security sake, but don’t cancel them. The possible exception is if the old card charges an annual fee, go ahead and cancel it if you won’t be using it.
• Annual fees can be OK. Often times, cards with annual fees have better rewards programs that will benefit card members who spend a lot on the card each year. Consider what you hope to earn in rewards from the card, and you may find out the annual fee is well worth the additional perks.

*Note: There is a time not to use credit cards…when you’re struggling to pay off long-term debt. If this is you, focus on getting out of debt before you shop for a new credit card.

MY FAVORITE CREDIT CARDS

With that said, what are my favorite credit cards? It boils down to these two:

• The Chase Freedom Card†
• Blue Cash Everyday Card from American Express†

I have both an American Express Card and Chase Freedom, the latter of which I use for most purchases simply because Visa is accepted everywhere (I do, however, greatly prefer Amex’s customer service and Website). Chase Freedom pays unlimited 1% cash back on all purchases plus 5% back on categories that change every three months, up to a dollar max.

Amex Blue Cash pays 1% cash back on everything plus 3% cash back at supermarkets and 2% cash back at gas stations and department stores. There’s also a preferred version which, for a $75 annual fee gets you accelerated rewards: 6% cash back at supermarkets and 3% cash back at gas stations and department stores. There’s also a $100 sign-on bonus.

Chase is also offering teaser bonuses for new applicants…$200 cash back after you spend $500 in three months or $50 cash back when you spend $500 in three months plus a 0% APR on purchases for 12 months. Pick your poison.

If You Ever Carry a Balance

As someone who knows all too well how quickly you can get in trouble with credit cards, my advice to you is never carry a balance on your credit card; pay the balance off each month. Failure to follow this advice is, at best, an expensive way to borrow money and, at worst, a slippery slope that can quickly put you tens of thousands of dollars underwater.

That said, I know many people choose to carry a credit card balance occasionally—to finance a big purchase over a few months or take advantage of a 0% teaser APR, for example. If you must do this, pay careful attention to which card you’re using, because many of today’s cards with the best rewards have the highest interest rates and—at those rates—carrying even a small balance quickly adds up to more than whatever rewards you earn.

If you’re looking for a good contender, there is the Discover More Card† which combines 1% cash back with 5% back on changing categories with strong customer service and the best online account management I’ve seen. There are also an 18-month 0% balance transfer and a $0 balance transfer fee options right now†. Both cards have regular APRs that are among the lowest for the best-qualified applicants..

Although these are the cards I’ve liked for awhile, other issuers are catching up with the cash rewards options.

The Bank of America BankAmericard Cash Rewards card just changed its rewards structure to pay 1% cash back plus 2% on groceries and 3% on gas, but you only get those higher rewards rates on up to $1,500 in purchases per quarter.

Additionally, the new Capital One Cash Rewards Card offers 1% on all purchases plus a 50% bonus on your rewards at the end of the year (essentially 1.5% cash back).

CREDIT CARD SIGN UP BONUSES

In most cases, the best reason to apply for a new credit card is to get a card that’s going to deliver the best long-term value to you based upon how you spend. That said, if you can find a good card for you that’s offering $100, $200 or even more as a sign up bonus, even better…

Citi® Dividend World MasterCard® – $300 Cash Back† gives you $300 cash bonus if you spend $5,000 on the card in 3 months plus 1% cash back on everything and 5% cash back on categoreis that change each quarter (see a pattern yet?).

Although I think cash back credit cards are a better deal for most people, travel cards can be attractive 1) if the idea of earning free travel seems more “rewarding” than just cash or 2) you travel frequently enough to benefit from card perks like free checked bags or priority boarding.

The Chase Sapphire Preferred Card† (a $95 annual fee) is still offering a hard-to-beat 50,000 bonus points for signing up and spending $3,000 in the first three months. They claim that’s enough for $625 in air travel or hotel accommodations.

Compare More Cards

• Filter and compare more credit cards here with an interactive table.

Disclaimer: One way I’m able to support my blogging while helping you is to link to products I like and earn a referral commission if you sign up. I only link to products I trust. That said, you should know that if you click the links to these cards and ultimately apply for and are approved for that card, I may be paid for that. If you choose to support Money Under 30 in that way, thanks!

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Love them or hate them, credit cards are a fact of financial life.

They can make tracking spending effortless.

Just as easily, they can blur the line between how much money you have and how much you can spend—plunging you into debt.

And even avoiding credit cards altogether is not without risk; you may need credit history to buy a home or lease an apartment, purchase insurance, or even get hired.

Hence these frequently-asked questions:

• When should you get your first credit card? [Skip to answer]
• When should you use credit cards? [Skip to answer]
• When should you not? [Skip to answer]

I’m going to give my opinions on each below, but I want to hear yours. Let us know: 1) When you got your first credit card and 2) How you use credit cards today. Share your thoughts now here.

When to Get Your First Credit Card

I realize this won’t apply to many of you who already have credit cards, or who have decided against them—so just skip ahead—but I get asked these questions a lot:

• When should you get a credit card?
• And how do you get your first credit card?

I got my first credit card when I was only 17 and still in high school. It came as part of a banking package at my family’s credit union. I’m pretty sure my parents were cosigners until I turned 18, at which point it became the sole signature on the account.

Getting a credit card this early had pros and cons, but in my case, it was mostly bad. Like lots of people who don’t know better, I quickly used my credit card as a way to “print money”, buying stuff I couldn’t afford and setting the stage for eight years of going deeper and deeper in debt. Cruelly, although I was going into debt, by making minimum payments on time, I was also building good credit at a very young age. By 18, I had my second credit card, and soon after my third—this one with a $11,000 credit limit (as a full-time college student with virtually no income). For these reasons, I recommend that you don’t get your first credit card until you’re either:

• Financially independent of your parents or
• About a year away from beginning full-time work.

Here’s why I see it this way:

First, credit card issuers aren’t allowed to issue credit cards to anybody under 21 without parental permission or proof that the applicant is financially independent. So for one, it’s just easier to wait until you’re 21 to get a credit card.

If your parents are supporting you through school or as you find work, they can (and should) make you an authorized user to make changes to their credit card account so that you don’t incur debts on your own you can’t pay. For money you may earn on your own, just stick with a debit card. The good news is, being an authorized user on a parents’ account can help you build credit yourself. Often times, parents want grown kids to have their own credit cards “for emergencies”, but there’s no reason this card can’t be the parents’ account as I described above.

So what if you’re earning your own income and no longer have access to the bank of mom and dad? Don’t focus on getting a credit card to finance an upcoming trip or furnishings for your new apartment, but do consider getting one to continue building a good credit history.

To reiterate, apply for a card either:

• When you start making a decent income –or–
• If you’re a full-time college student 21 or older, about a year before graduation. (That’ll give you time to build up some credit in case you need it for a lease or job application.)

HOW TO GET YOUR FIRST CREDIT CARD

As I mentioned above, your best first credit card is probably your parents’ card. As an authorized user on their account, you’ll begin building credit but will be subject to mom and dad’s scrutiny if your spending gets out of line (that’s a good thing). This will make it easier to get approved for the credit card of your choice when you’re ready for your own.

• If you’re a full-time student, a student credit card will be your best bet.
• If you have a full-time income, you should have your choice of the best credit cards available.

Note: Check your credit first. To qualify for most credit cards, you’ll need a credit score in the high 600s at least. CreditKarma is a free, no-strings-attached way to check in your credit score before applying.

Getting a Credit Card without Any Credit History

If you do not have any credit history, getting your first credit card can be a catch-22. You need one to build credit but you can’t get one without credit history.

Consider visiting a branch of the bank where you have a checking account. Talk to somebody in person and tell them you don’t have a credit history but want to start building one with a credit card. They may be able to get you started with a low-limit credit card or they may offer you a secured credit card—an account that requires you have cash in a bank account to cover any purchases you make with the card. (But, unlike a debit card, these accounts do build your credit.) And, in most cases, you can ask your bank to upgrade your account after a year or so of responsible usage.

Recommended “No Credit” Credit Card

Alternatively, you can apply for the Orchard Bank credit card. (Disclosure: This card is an affiliate. I only recommend products I use or have vetted, but I always want you to know when I have any sort of relationship with a company).

These cards are issued by HSBC. They’re designed for applicants building credit, and will approve your account either as an unsecured or secured card and allow you to upgrade over time. Some Orchard Bank cards have annual fees, so read the fine print carefully before you apply, but unlike other cards marketed to people without credit history, the fees are less than $100 a year and fully disclosed. You can also cancel in the first month to avoid the fee if you change your mind.

Beware Really Bad Offers!

Whatever you do, avoid other Websites advertising cards designed for people with no credit or bad credit. Most of them are incredible rip offs with multi-hundred dollar fees, misleading claims, and terrible customer service.

When to Use Credit Cards

When it comes to how we use our credit cards, we’re all unique.

Some people use one card for virtually everything they buy. Others only use credit cards to buy big ticket items. Others buy different things with different cards, hoping to maximize the rewards they can earn. Others use whatever credit card “has room on it” (a sure sign you need a trip to the financial emergency room).

My wife and I have one credit card we use for virtually everything we buy. Our checking account pays the balance—in full—automatically every month. She and I each have another credit card: Hers she uses for occasional purchases she makes with “non-joint” money, mine I use for tax-deductible expenses relating to this blog and business travel for which I’m reimbursed. That’s it. We have a few other cards that are open but we don’t carry in our wallets. There’s little point to closing them because open, unused credit cards help our credit scores.

In most cases, I recommend a similar strategy. Carry two credit cards: One as a backup, and one for literally almost everything else. This lets you easily track spending and get one percent or more back on everything you buy. The caveat, of course, is that you should pay that card off in full every month, no exceptions.

If you choose to carry a balance and pay it off over a few months, whatever. It’s playing with fire and, depending on your interest rate, it may be expensive. But if you think you know what you’re doing, I won’t stop you. If you get in any deeper than that, however, it may be time to stop using credit cards (see below).

WHAT ABOUT 0% APRs?

As you probably know, you can get a new credit card that won’t charge you interest for six months or a year on new purchases. If you’ve got your finances in order and your head about you, I don’t see anything wrong with taking advantage of this to finance a big purchase with no interest.

But, personally, I would only do this if:

• I had cash in the bank to pay off the balance at will.
• I was prepared to be vigilant in repaying the card on time each month and in full before the end of the introductory period (to avoid inadvertent fees and interest).

When NOT to use Credit Cards

I can think of three situations in which you should stop using credit cards:

Reason #1: You’re in credit card debt over your head, so you absolutely should NOT use credit cards to make new purchases until you’re out of debt. Freeze ‘em, cut ‘em up, or cancel them outright if you have to. But you must learn to spend without them so you can focus your free dollars on paying off the debt you already have.

Reason #2: You occasionally can’t pay your balance because you spent too much last month. Consider stopping using credit cards and sticking with debit cards. Once you’re in a slightly more stable financial position (for example, you have a few months’ expenses worth of emergency savings and a 2-3 week’s pay cash buffer in the bank, you may consider carefully using credit cards again.

Reason #3: You otherwise know that you’ll use credit cards as a license to spend more than you have. Some people are alcoholics, others can drink in moderation. Likewise, some people can’t use credit the way most people do. If you suspect this about yourself, stay away from credit cards, and consider working with a counselor to address the reasons behind the behavior—this isn’t a financial problem so much as a psychological one.

What do you think? When did you get your first credit card? In hindsight, would you do it the same way again? If you feel strongly about how you use credit cards (or the fact that you don’t use them at all), feel free to share why as well!

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But that’s not the only reason credit cards are the safer way to pay. To discuss some valuable but often-overlooked credit card perks, here’s Michael:

Love ‘em or hate ‘em, the fact is many credit cards come with some benefits you just can’t get with debit cards or cash. You probably know about rewards and fraud protection, but lesser-known credit card benefits are sometimes the most valuable.

What I’m talking about are various insurance benefits many credit cards offer cardholders. Here are some of the most useful:

INSURANCE FOR STOLEN OR ACCIDENTALLY DAMAGED ITEMS

How many times have you bought something, only to break or lose it soon after? I actually just had this happen to me a couple weeks ago. I bought a hoodie that I snagged on sale, only to totally mess it up a week later in the dryer…the fabric melted!

Unfortunately, I bought this with my Discover card. I used it to earn the 5% cash back at the department store, but, sadly, Discover doesn’t offer this benefit. If I had used an American Express card like the Preferred Rewards Gold Card, I would have been covered with Amex’s Purchase Protection insurance. In a nutshell, here’s how it works:

On eligible purchases you will be protected up to $1,000 in the event of accidental damage or theft occurring within 90 days from date of purchase.

Not surprisingly, the fine print lists a barrage of Purchase Protection exclusions, but most of them are to be expected. For example, you can’t blame AmEx for excluding motorized vehicles, living things, and perishable items. (Otherwise people could make claims for the moldy bread and bananas they forgot to eat.)

Visa offers a similar program called “Purchase Security” and MasterCard has “Purchase Assurance”, but both of these come with more restrictions than the AmEx program. Furthermore, not every Visa/MC includes it.

TRAVEL ACCIDENT INSURANCE

This benefit is included on most mid-tier and premium cards. The amount of coverage varies by card but it’s usually in the neighborhood of $100,000 to $500,000.

So when is all that moolah paid out? Well, if you die during “Common Carrier Conveyance” travel (an insurance term for passenger plane, ship, train, etc.), then your beneficiaries should be paid the full amount. If you survive the accident but are “dismembered” (i.e., you lose a limb or finger) then you will be directly paid a fraction of the amount.

There are a couple important things to point out here. First, this benefit only applies to travel paid for with the credit card. Second, some issuers also provide coverage beyond the “Common Carrier” part. For example, if you were on the way to the airport for a flight and your crazy taxi driver crashes, some cards may still cover you since you had technically already begun your trip. You’ll need to check with your card issuer to find out what is and isn’t covered.

One last thing…make sure you tell your loved ones about this benefit! Why? Because if, God forbid, you do die in an accident, you won’t be around to remind your parents or spouse about this benefit. Otherwise all that money may go unclaimed!

INSURANCE FOR LOST, DAMAGED, OR STOLEN LUGGAGE

In addition to your life, your luggage may be insured, too. Fortunately, you don’t have to die to get paid for this one!

Like the travel accident insurance, credit card luggage insurance applies to “Common Carrier Conveyance” (for most of us, this means travel on an airline).

If your luggage is lost, damaged or stolen, the credit card company may offer up to $1,250 (or more) in coverage. This is secondary to other forms of insurance. So if your luggage was worth $1,500 but the airline only pays you $1,000, then the credit card company will cough up another $500.

This benefit isn’t as common as some of the others mentioned here. Typically, you will only see it on premium travel cards and those with annual fees. There are a few exceptions, however, such as Visa Signature and World MasterCard tiers (which are sometimes free).

CAR RENTAL INSURANCE

This benefit is extremely useful as long as you understand how it works, because there is a boatload of fine print that goes along with it.

For starters, with almost every card you are given secondary coverage. So if you total that bright shiny 2011 Mustang you rented at Hertz and your personal car insurance provides coverage for rentals, don’t expect your credit card to pay any more than the deductible. However, if there are no other forms of coverage in place (i.e. you don’t own a car with insurance), then the cardholder coverage will kick in.

The benefit varies greatly by card and issuer but here are a few things to point out:

• If you don’t pay for the rental in full using the card, you won’t be eligible for this benefit.
• There’s a laundry list of vehicles that are excluded. Luxury cars, exotics, trucks, and even some SUVs are not eligible.
• Most cards will also cover you outside the United States but there are excluded countries.
• Coverage for administrative, loss of use, and other fees that rental agencies will ding you for aren’t always covered.

You can compare car rental coverage by credit card company, in which you’ll notice there are a couple of options if you want primary coverage instead of secondary. The Continental Airlines OnePass Plus and most Diners Club cards offer it.

EXTENDED WARRANTY COVERAGE

It rarely ever makes sense to pay for an extended warranty, but what if you get it for free? Well, you may be surprised to learn there’s a good chance the card in your wallet already gives you this benefit! Quite a few Visa and MasterCards include this, but American Express is the granddaddy of them all because they include it on all of their cards and provide more extensive coverage:

American Express will extend the terms of the original U.S. manufacturer’s warranty for up to one additional year on eligible purchases with warranties of 5 years or less, when the eligible purchase is charged to the card.

I have heard from members on my forum that had their laptops, phones, LCD TVs, and other devices covered b AMEX. It’s an extremely useful benefit, but you’ll wan to verify certain coverage exclusions imposed by AmEx.

TRIP OR TICKET CANCELLATION INSURANCE

Ever book a trip that you were unable to take due to illness? Or maybe you shelled out big bucks for tickets to a concert or game, only to come down with the flu a day before?

With some some credit cards, you can actually be reimbursed if your trip/ticketed event is cancelled or interrupted due to qualified circumstances. What qualifies, you ask? That varies by issuer, but if you or someone you’re traveling with has a serious illness or injury, there’s a good chance you will be covered. Some card issuers even cover things like natural disasters, losing your job, terrorism, labor disputes, and more.

If you want a card that offers this type of insurance, you may want to check out Escape by Discover.

INSURANCE FOR UNRETURNABLE MERCHANDISE

I think you probably would agree with me that stores are mostly accommodating when it comes to accepting returns, but every once in a while we encounter one that gives us a hard time or just doesn’t accept returns, period.

When that happens, this benefit can come in handy. Here’s how the AmEx version works:

If you buy an eligible item and the merchant won’t accept your return during the first 90 days, AmEx will refund the full purchase price, up to $300 per item/$1,000 annually. However, shipping and handling costs will not be refunded.

Some Visa cards offer similar coverage but the benefit is capped at $250 per item/$1,000 annually. MasterCard is the same as Visa, except that coverage is only available up to 60 days after purchase.

Weigh in: Have you used any insurance benefits on your credit cards? What happened? How’d it work out?

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I don’t want to annoy you with too many posts about new products, but trust me that this one is cool. And it’s free!

(Disclaimer: Money Under 30 is a part of Credit Sesame’s affiliate program, meaning the site earns a small commission for referring new users. As in all other content, I only recommend products I believe in and will tell you if I get anything for mentioning them.)

That said, here’s the plug.

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Not surprisngly, I later started to hear from many of you wondering…what are the best credit cards for traveling abroad?

CAPITAL ONE

Capital One credit cards are unique in that none of them charge a foreign currency transaction fee. That said, several readers have pointed out to me that Cap One’s currency conversion rate is not be as favorable as other credit cards, which dilutes the benefits to not charging the fee. Still, fee-free cards like the Capital One Venture card may be worth considering.

To move up to other cards well-suited to travel abroad, you’ll have to choose a card with an annual fee.

AMERICAN EXPRESS

American Express credit cards (link is to another site I run) are noted for the special support they can give cardmembers traveling abroad, and all Amex cards charge between one and two percent less than other card companies for foreign transactions.

Then, for those who can afford the $450 annual fee, The American Express Platinum Card is probably the ultimate jet setter’s credit card. The Platinum Card has NO foreign currency transaction fee, offers 24/7 concierge service, gets you in to many airline lounges for free, and will even arrange for a private jet to fly you home…free…if you get sick or hurt traveling abroad. So if you’re cashing in your trust fund to globe trot in style for a few years, this is your card.

CITI THANK YOU PREMIER

For the rest of us, the new Citi ThankYou℠ Premier Card has a fee of only $125 (and it’s free for the first year) and also offers no foreign currency transaction fee. There are also other perks like a free annual domestic companion ticket, 1% rewards with no limit, and up to $300 in gift cards after you spend $2,000 in the first three months after account opening. There’s also the fact that Visa cards are more widely accepted than Amex (and this becomes even more important outside the states).

CHASE SAPPHIRE PREFERRED

As of May 2011, if I had to pick one credit card to recommend for those interested in travel aboard, it would be the Chase Sapphire Preferred Card. For a $95 annual fee (waived the first year), you get no foreign transaction fee, the global acceptance of Visa/Mastercard, a good travel rewards program, and 24/7 concierge service. Plus, right now Chase is offering 50,000 bonus points for new card members if you spend $3,000 on the card in the first three months (redeemable for $625 worth of travel).

Learn more or apply for the Chase Sapphire Preferred card here, or read more in this review of the Sapphire credit cards.

One Note

If you’re just heading overseas for a week or two, you probably don’t need a special credit card. If you’re travelling abroad frequently or for several months, then you might consider it. Whatever you do, check with your existing credit card companies and bank to learn their fees on foreign transactions before you go, and just try to stick with the cheapest method. Typically withdrawing cash at an ATM or using your credit card will be less costly than using money changers.

Search More Credit Cards

CreditCards.com Apply for a credit card today

• What are the best credit cards for young adults?
• What’s a good first credit card?
• And when should somebody get a first credit card anyway?

My take on the last question: DO NOT get a credit card until you have a full-time income. (If you think you need one for emergencies while you’re a student, ask a parent to make you an authorized user on their card. It’ll keep you out of trouble and start to build your credit.)

As for what card to get, it all depends whether you have already established credit or not. For example, have you already had a credit card, or do you have student loans? If you’re still unsure, check your credit score to find out what kinds of credit cards you’ll qualify for.

THE BEST CREDIT CARDS FOR STARTING OUT

For applicants with established and good credit who want an all around card that will provide cash rewards, a 0% intro APR, no annual fee and a low regular APR, the Discover More Card is extremely well-rounded. Discover provides the best online account management and offers, in my opinion, the best mix of features of any major credit card. (Most cards that have great rewards have high APRs; most cards that have low APRs have few or no rewards—Discover offers both.)

If you have established credit history and want the best cash rewards in a universally-accepted Visa card, check out Chase Freedom, which offers unlimited 1% cash back and up to 5% in rotating categories. It’s a card I use, and I’ve been happy with it.

Finally, if you have no credit history or have fair credit, an Orchard Bank® Classic MasterCard® is a good bet. They have higher rates and fees than mainstream cards but are a far better way to get and build credit than many cards that are marketed to people with “poor credit”. Stick with this card for a year or two, use it responsibly, and you’ll have credit that will enable you to step up to an even better card.

Apply for These Cards Now

Chase Freedom® MasterCard – $100 Bonus Cash Back + 0% APR
	Earn $100 Bonus Cash Back after you make $500 in purchases in your first 3 months 0% Intro APR for 12 months on balance transfers and 6 months on purchases. 5% Cash Back on up to $1,500 spent at gas stations and on Amazon.com from 1/1/12 – 3/31/12. You’ll enjoy new 5% categories every 3 months like grocery stores, restaurants and even airlines. It’s free and easy to activate your bonus each quarter! Unlimited 1% Cash Back on all other purchases Up to an additional 10% Cash Back when you shop online at select merchants through Chase Cash back rewards never expire No Annual Fee My Take: Probably the best all-around cash rewards card available today, but NOT the right card for anybody who plans on carrying a balance.
Intro APR Intro APR Period Regular APR Annual Fee Balance Transfers Credit Needed 0%* 12/6 Mos. (BT/Purchases) as low as 11.99% Variable* $0 Yes Good Credit

Not decided yet? See even more recommended credit cards »

Disclaimer: One way I’m able to support my blogging while helping you is to link to products I like and earn a referral commission if you sign up. I only link to products I trust. That said, you should know that if you click the links to these cards and ultimately apply for and are approved for that card, I may be paid for that. If you choose to support Money Under 30 in that way, thanks!

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Still, if you’re like me, you probably enjoy playing the game…”How much can I get back for stuff I’m already gonna buy?”

DISCLAIMER: If you pay interest on credit card balances or you buy more than you ordinarily would in order to earn rewards points, you might want to reconsider using credit cards at all–you’re falling into the credit card companies’ traps. You need to get out of debt, not worry about rewards.

For everybody else, you might be wondering, am I getting the most from my credit card rewards? Consider the different ways you can redeem credit card rewards:

When all is said and done, credit card points are worth, on average, a penny a piece.

Many traditional “point-based” rewards credit cards make you spend more points to get cash or a cash equivalent rewards (e.g., a Visa gift card) than to get branded gift cards or merchandise, lessening the points’ value. No thanks.

The value of credit card “miles” is a mixed bag. Can you snag an award ticket for 25,000 miles that’s worth $300 or more? Perhaps, although it’s not easy, and the majority of tickets you’ll find for so few miles may cost less than $200 in cash. If, however, you use miles to travel internationally—or, in first class seats—credit card miles can actually be worth $0.05 or more a piece.

Then again, at the end of the day, cash is cash. You know what you’re going to get.

WHY MILES CREDIT CARDS EXIST

Since I started writing about personal finance nearly eight years ago, I’ve become fascinated by the well-oiled credit card marketing machine. (For example, did you know you might get an offer for a credit card offering a 0% intro APR for six months and 18% regular APR when you could apply for the EXACT SAME card online and get a 0% APR for 18 months and a 12% APR?) It happens all the time.

Years ago, the best credit cards were the ones with the lowest interest rates, longest grace periods, and lowest annual fees. Today, those features are still important, but the rewards a credit card offers plays a much bigger role in how we choose credit cards.

Unfortunately, many consumers (those who carry credit card balances) will choose credit cards based upon rewards when they should be looking at interest rates.

I have this theory that credit card companies created miles credit cards because the idea of a earning a “free” vacation is more titillating than simply getting cash back and, therefore, is apt to get us to spend more (in the name of chasing rewards) for miles that are actually worth less than the credit card would pay us in pure cash back. Take the miles credit card du jour, the Captial One Venture Card, with its ads starting the somehow endearing Vikings plowing their way through Las Vegas and a beach resort.

Capital One and other credit card issues are trying to sell you a credit card based upon the fantasy of a free vacation.

Sounds nice, doesn’t it?

Unfortunately, there are a few problems with this:

• It takes a lot of rewards to earn a vacation, or a even a flight.
• The value of a mile all depends on how you decide to cash it in…for most people, miles are only worth about a penny.
• In which case you could choose a credit card that gives you a penny or more back in cash for every $1 spent.

Even a few years ago, only a few credit cards offered cash rewards…now you have several options—here are a few major credit cards that offer some of the best cash rewards (though this list is not exclusive):

TOP CASH REWARDS CREDIT CARDS

With these and other cash-back cards, the question I have to ask is: why wouldn’t you choose the CASH REWARDS card?

WHY MORE PEOPLE ARE CHOOSING CASH BACK

Apparently you agree. I recently asked my Facebook fans to chime in on the question of miles versus cash rewards, and the response was about 75% in favor of cash. Here’s a peak:

Surprised? I’m not. After all, cash is cash. It doesn’t expire, and there are no blackout dates.

WHEN MILES DO MAKE SENSE

If your a miles guy or gal, relax, I’m not trashing the concept of credit card miles altogether. There are places that earning miles make sense. Primarily: If you take frequent international flights (preferably trans-Pacific ones) and/or you like to fly first class.

Whatever do I mean?

The fact is, frequent flyer miles (including credit card miles) are worth much more per mile when redeemed for long-haul flights and business or first class seats. Take a look at the following examples:

The Value of Frequent Flyer Miles by Route and Class

Don’t believe me? Check out more articles on the value of a mile from SmarterTravel here and Consumer Reports here.

WHEN AIRLINE CREDIT CARDS MAKE SENSE

If given the choice between a no-fee credit card that pays miles and one that pays cash, I’ll take the cash…unless, perhaps, I’m gearing up for frequent trips to Australia.

That said, if you fly frequently enough on one particular airline (most likely for work), then carrying that airline’s branded credit card may make sense, even if you pay an annual fee. In addition to the miles, some of these cards offer other perks like free checked bags, discounted access to airport clubs, or even accelerated membership into elite loyalty programs (the kind that earn you free first class upgrades). Here’s a look at a few of the leading U.S. Airline credit cards that DO and DO NOT offer attractive additional perks:

(If you’ve never been a frequently traveler and don’t understand why anybody would pay $150 a year for a chance to get “elite status” faster, no worries…but these cards probably aren’t for you. If you STILL want to earn miles, however, then check out cards that let you earn miles good on any airline like the Chase Sapphire Card, Blue Sky from American Express, or the Capital One Venture Card.

What about you? What rewards do you chase? If you’re loyal to a mileage credit card…why? Are their perks you get (besides cash or miles) that make you loyal to a particular card?

Disclaimer: One way I’m able to support my blogging while helping you is to link to products I like and earn a referral commission if you sign up. I only link to products I trust. That said, you should know that if you click the links to these cards and ultimately apply for and are approved for that card, I may be paid for that. If you choose to support Money Under 30 in that way, thanks!

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In a post I’ve been wanting to do for a while, I want to step back to the basics of credit scoring and lay down the facts. This may be remedial for finance blog junkies (sorry), but for everybody else this is THE crucial information to have on credit scores. If you read nothing else on credit scoring, this should be it. In this post, I’ll quickly cover:

• What is a credit score?
• Why does your credit score matter?
• What’s a good credit score?
• How do you get a good credit score?
• How do you fix a bad credit score?
• How do you get your own credit score?

Short on time? You can get the basics from this doodle:

If I had to fit this post on the back of a napkin, this is what it would look like. The keys to a good credit score are paying your bills on time, having a mix of accounts (credit cards and loans), and keeping accounts in good standing for many years. Ta-da! But seriously, the meat and potatoes follow.

WHAT IS A CREDIT SCORE?

A credit score is a number that measures how likely you are is to repay a loan on time.

That’s it. Your credit score is based upon your history repaying loans. Banks use your credit score to decide whether or not to loan money to you and, if they make the loan, what interest rate to charge. For better or worse, your credit score may also be used by landlords, insurance companies, and even employers to decide whether or not to do business with you. (I’m not saying that’s fair—and I don’t think it is—but it’s reality).

WHY DOES IT MATTER?

See above. Your credit score may matter if you apply for a job or insurance, and it definitely matters if you ever need a loan. If you don’t establish a good enough credit score, most banks won’t give you a loan for a car, home, or business. And the higher your credit score is, the less interest bank will charge you for the loan.

Who cares? Well, you should if you care about saving money. For example, the difference in total interest payments on a $250k, 30-year mortgage between a 5% interest rate and 8% interest rate is about $179k. That is the cost of less-than-perfect credit.

WHAT’S A GOOD CREDIT SCORE?

The classic question. Unfortunately, it’s also hard to answer because your credit score is a moving target. There are two primary reasons for this:

• Different companies calculate your credit score differently (and on different scales).
• Your credit score is a ranking, not a rating (it’s like test scores put on a Bell Curve).

Every time you apply for credit, you don’t know which scale(s) your lender will use to pull your credit score. In addition, you don’t know what their criteria are. For example, over the past couple of years the standard for a “good FICO score” has increased somewhat dramatically.

Note: FICO stands for Fair, Issac and Company, the providers of the some of the most commonly-used credit scoring algorithms. Your FICO score is just another way of saying your credit score (like Kleenex vs. tissue).

But with that disclaimer in place, you can be confident that a score of 720 is “good” on most scales, while a score of 800 is “very good” on most scales. Scores in the high 600s aren’t necessarily bad, but they won’t qualify you for all loans or the best rates. Finally, it’s important to note that once your credit score approaches the high 700s to low 800s, any further increases won’t do much for you…banks will already give you the best rates. (It’s like if a prof awards an A+ to numerical grades of of 97-100, once you hit 96 there’s no additional benefit to getting a 98 or 99, etc.)

HOW TO GET A GOOD CREDIT SCORE

There are three big components to a good credit score:

• Establishing credit over time.
• Paying bills on time.
• Staying out of credit card debt.

Establishing Credit

The first step is often the trickiest, because you need to get credit before you have a credit score. There are several ways to establish credit for the first time, but it’s arguably easier to do when you’re young and either in college or still dependent on your parents. For example, you can:

• Ask a parent to make you an authorized user on one of their credit cards.
• Take out a federal student loan.
• Take out a loan with a cosigner.
• Get a secured credit card.

Once you have one open account, it becomes easier to get additional accounts. Over time, you’ll get the best credit score when you have at least one or two credit cards and one or two loans (like student or auto loans). That said, more accounts is not necessarily better. Finally, a key part of credit scoring is time. It typically takes several years to develop a good credit score.

Paying Bills on Time

If I had to sum up advice for maintaining good credit in five words, it would be this: Pay your bills on time.

Nothing builds credit more reliably than paying your credit cards and loans on time every time. Not surprisingly, nothing will wreck your credit score faster than failing to pay these bills on time. The longer you take to pay them (and the more often you’re late), the lower your credit score will fall.

An example: I’ve had fairly good credit all my life, but once many years ago I screwed up and paid two bills late. My credit scores fell by an average of 60 points and it took two years to fully recover.

Staying Out of Credit Card Debt

Carrying credit card debt is bad, mmm-k? It’s bad for your finances in general and it’s bad for your credit score.

Credit card utilization (or how much of a balance you carry in relation to your credit limit) impacts your credit score. The higher your combined balances in relation to your combined credit limits, the more your credit score will suffer. For the best credit score, you want to keep this “utilization ratio” as low as possible.

And, for advanced credit score hackers, there are other things to take into account here, like the fact some credit cards that don’t report credit limits can negatively impact this ratio and, thus, your credit score. That said, the bottom line is having a credit card or two is good for your credit score, but carrying credit card debt is not.

HOW DO YOU FIX A BAD CREDIT SCORE?

The same way you build a good one! By paying your bills on time and staying out (or getting out) of debt.

Unless you’ve been the victim of identity theft or otherwise have errors on your credit report, the only way to “repair” your credit is to pay your bills, pay down debt over time, and avoid applying for new credit. Expect it to take between one to two years of responsible credit management to make an impact on a troubled credit score, and be wary of anybody who tries to sell your shortcuts to a better credit score.

HOW DO YOU GET YOUR OWN CREDIT SCORE?

Undoubtedly you’ve seen the incessant ads for ways to check your free credit score. All of these services make you sign up with a credit card for monthly credit monitoring services and then cancel that service within seven days if you don’t want them…that’s how your score is “free”. It works, I’ve done it, but it can be a pain. (And I typically don’t recommend credit monitoring unless you’re a frequent victim of ID theft or you’re just obsessed with that sort of thing).

That said, if you want your official credit score—either free or for a one-time fee—here are the links to these offers.

Alternatively, you can try CreditKarma, a totally free service that provides unlimited estimated credit scores. You have to create a free account, and then CreditKarma pulls your credit report and gives you an estimated score. I’ve tested it, and it’s accurate within 10-20 points of my actual FICO score. The service also provides some useful charts for comparing your credit score to averages. Read more about how to check your “real” FICO score here.

So there’s you have it—the five minute guide to your credit score. Think I missed anything important? I specifically didn’t get into some of the nuances of perfecting credit (like deciding when to cancel credit cards, for example), but hoped to cover all the biggies. Let me know what you think, or if you have credit scoring questions leave them in the comments and I’ll try to find an answer.

Why? Several major credit cards are offering up cash bonuses of up to $100 if you apply for a new card and spend a minimum amount. If you’re planning some purchases this holiday season anyway, why not score some quick cash back at the same time?

Okay, let’s back up. I DO NOT recommend applying for new credit if you’re digging out of debt or trying to sharpen your credit score.You might take part, however, if you:

• Pay your current credit card balances in full
• Have a FICO of around 700 or more (check your score now)

Also, because these offers require spending to get the bonus, you don’t want to get trapped buying stuff you don’t need. With the holidays upon us, however, that may not be a concern. Here are the offers:

• Discover More Card $100 Cash Back Bonus: Spend $500 in 3 months, get $100.
• Chase Freedom Visa $100 Bonus Cash Back: Spend $799 in 3 months, get $100.
• Chase Freedom MasterCard $50 Cash Back Bonus: $50 after first purchase.
• Citi Student Cards $50 Offer: Spend $50 in 3 months, get a $50 statement credit.

I got the $100 bonus version of the Chase Freedom card last month because it was time to change up my credit card portfolio anyway…but are you tempted? Offers like these can be a fun way to earn a little extra cash, as long as you’re not going overboard, damaging your credit score or spending just to chase bonuses.

Disclaimer: One way I’m able to support my blogging while helping you is to link to products I like and earn a referral commission if you sign up. I only link to products I trust. That said, you should know that if you click the links to these cards and ultimately apply for and are approved for that card, I may be paid for that. If you choose to support Money Under 30 in that way, thanks!

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If you find yourself in this situation, your options aren’t great. Essentially, you can:

• Put your home on the market as a short sale.
• Stop paying your mortgage and let the bank foreclose.
• Or, approach your lender about a loan modification.

Clearly, the first two options aren’t ideal—both ultimately mean you’ll lose your home and wreck your credit. So it’s no wonder most people are attracted to the idea of loan modifications. Although a loan modification may be an option to help you resolve the inability to make your mortgage payments, it’s critical to understand what you’re getting into before you file a loan modification application.

What is a Loan Modification?

A loan modification permanently alters the terms of your original home loan in order to make payments more affordable. Some loan modification programs offer a reduction in interest rate or of the principal amount due, although some modifications simply increase the term of the loan, resulting in a lower payment but more total interest paid.

Although loan modifications achieve similar results as refinancing, loan modifications may be available to borrowers even if they’ve defaulted on mortgage payments or are between jobs.

How Loan Modifications are Arranged

Some lenders will arrange loan modifications for distressed borrowers directly. Additionally, there is the government-created Home Affordable Modification Program (HAMP). Under HAMP, many lenders—including those which hold VA and FHA loans—agreed to offer similar loan modification standards. In order to be eligible for HAMP, borrowers must meet certain requirements. For example:

• The property must be owner-occupied.
• The borrower’s income must be verifiable.

The Reality of Loan Modifications

So far loan modifications sound like a great deal, right? You can get a more affordable mortgage payment on your existing loan even if you’ve lost your job or don’t have great credit. But consider the following unflattering realities of loan modifications:

1. Loan modifications do not address negative equity. Get a loan modification, and you get a lower monthly payment. In most cases, however, you’re still upside down on your house. That’s not good a long-term financial situation in which to be.

2. The odds a loan modification will succeed are not favorable. According to an October 2010 report by the U.S. Treasury Department, approximately 11% of loan modifications in the past nine months have failed. In other words, the borrower defaulted on the loan again. That may not sound that bad—after all, that means 89% of modifications succeeded, right? Maybe not. That statistic does not account for borrowers facing foreclosure during the trial loan modification period (because the foreclosure process can take months).

3. Many borrowers can’t access loan modifications in the first place. Either they may not meet eligibility requirements or their lender refuses to participate in modification altogether. For example, Bank of America will only modify a loan if the monthly payment amount is more than 31% of the borrower’s gross monthly income.

4. Some loan modification programs are simply scams. Unfortunately, whenever people are facing adversity, there are those that try to take advantage of their vulnerability. Any home owner consider modification should:

• NEVER give money up-front to individuals who claim that they will modify your loan.
• NEVER sign over a deed to your house to anyone that you don’t know.
• READ any paperwork you are asked to sign completely and carefully.
• NEVER sign any contracts with blank spaces where the person who claims to be able to modify your loan will “fill in the rest later”.

Despite the drawbacks, many Americans try loan modifications as a last effort to stay in their homes. For some, the programs work, for others they don’t. If you want to try to modify your home loan, visit the Department of Housing and Urban Development’s website at HUD.gov, to find a free HUD-approved housing counselor in your area. You can also call the government-sponsored Home for Homeowners program for free information over the phone, at (800) 225-5342.