There are many factors to consider when choosing a credit card and because these factors change so often, it’s impossible to create a guide to choosing credit cards that will fit everyone’s goals. Instead, I can just recommend a few guiding principles that will help you choose a card that works for you while avoiding mistake along the way. So here’s a beginner’s guide to choosing a credit card.
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Make sure you’re informed
You should have read and began familiarizing yourself with all the information in Step 2: Time to Get Informed. Specifically, when it comes to credit cards you want to make sure that you’re knowledgeable about:
- The major award programs (Ultimate Rewards, Membership Rewards, etc.)
- How to find the best credit card offers
- Cards that offer bonus category earning potential
- The rules for applying for credit cards
If any of these things are not familiar to you then you should go back to step 2 and read up on them, since proceeding with applying for credit cards without an understanding of these concepts could lead you to make mistakes.
1) Major reward programs
When you first look at all of the different transfer partners of Chase, American Express (and SPG), and Citi, it will probably feel like there’s an overwhelming number of options. However, once you start to get familiar with airlines and their alliances, it starts to feel less daunting.
Before applying for a credit card, I think it’s a good idea to familiarize yourself with some of the travel partners of each program. If you go through the list of travel partners and don’t see a partner you think you’d even use, then find the alliance partners for that airline and re-evaluate. Odds are, you’ll be able to find partners from each program that present transfer potential for your travel goals.
If you have a destination in mind then you can take it to the next step and research the award charts for your airline to see how many miles will be required to fly where you want to go and in what class you’re comfortable traveling in. If you can do that, then you’ll have a better idea on how many points you’ll need for a specific trip. If you’re not sure where where you want to go that’s fine, too. Just try to still get an idea about the mileage requirements.
2) Sign-up bonuses
It amazes me how sometimes there can be multiple offers out for the same card (sometimes all public) that offer different bonuses for the same card (sometimes much higher). You should always be sure that the offer you’re pursuing is the best available to you. Review Step 2 for steps on making sure you are signing up for the best sign-up bonus.
3) Bonus category earning potential
It’s a good idea at this point to have an idea of what kind of expenses you spend most of your money on. And you should also check out what kind of bonus categories are on the major cards to see which cards might offer you the most earning potential in the long-run. Some cards to check out are:
- The Chase Sapphire Reserve
- The Chase Sapphire Preferred
- The Chase Ink Cards
- The Chase Freedom Cards
- The American Express Premier Rewards Gold Card
- The Everyday and Everyday Preferred from American Express
- The Citi Thankyou Premier and Citi Prestige
- Discover It
4) Credit card rules
Credit card rules aren’t just important for avoiding an otherwise avoidable denial. They are also very important in forming a sound strategy for applying for credit cards. If you’re about to apply for a credit card and you still don’t know what the Chase 5/24 rule means you’re probably not ready to jump in just yet. For your reference, some of the most important rules to be aware of are: the Chase 5/24 Rule, Chase 30 day rule, Citi 8/65 rule, and American Express rules.
Know your approval odds based on your credit score
If you want to take a look at some resources to research what kind of credit score got approved for different cards check out the following resources:
Keep in mind that there is a lot more than a mere score that goes into many credit card approvals. You could have a “perfect” score of 720 but with no established credit history you’d probably get denied for cards like the Chase Sapphire Reserve and a lot of American Express cards. At the same time you could have a 690 but a long credit history and perhaps get approved for those same cards. It’s always hard to judge.
The key is to be knowledgable about the ranges needed for certain cards so that you don’t apply for a card that you’re basically guaranteed to be denied by.
This is probably one of the most crucial things to do.
In addition to the information above, you should now be plugged into to the forums, blogs, and social media pages of the many bloggers that are out there. If you do that it will be easy to keep current with all of the changes that happen all the time and you will be more likely to find the best offers to take advantage of. I’ve seen offers come and go in a matter of hours so it’s very important to stay plugged in.
It’s also important because rumors of changes to credit cards constantly leak weeks to months in advance for many cards. Sometimes these changes are true game changers that should alter your application strategy, and so just by staying “in the know,” you can avoid losing out on valuable opportunities.
Develop a strategy
So once you’re sufficiently informed, it’s time to develop a strategy for applying for credit cards. There are basically three different types of strategies for applying for credit cards.
This strategy involves lumping all of your credit card applications together at the same time. It used to be that banks wouldn’t receive notification of a hard pull in an instant so by applying for many cards at the same time, you could increase the odds of getting approved since the bank wouldn’t know you’d just applied for X amount of cards.
Now, hard pulls are reported immediately. I have an app on my phone that tracks hard pulls and it literally notifies me about a hard pull before my credit card application is even finished processing! So nowadays, this isn’t a good reason to do an app-o-rama.
While some still do the app-o-rama, I’m not a fan of it. I feel like it puts too big of a burden on meeting a lot of minimum spends at once and also doesn’t leave you much breathing room to jump on unexpected bonuses when they pop up. I much prefer the slow and steady approach.
2) Slow and steady
I recommend reading my strategy on applying for multiple credit cards. (Some of the offers described in that article have or will change over time but the underlying principles stay the same.)
The strategy is designed so that you’ll go after the most valuable cards that you will later be excluded from first, while also giving yourself a chance to receive targeted offers. It also emphasizes frequently examining your pace so that you leave “room” for applying for unexpected offers and don’t overwhelm yourself with minimum spend requirements. Everyone will have a different pace based on things like income and miles and points needs, but the important thing is to find that perfect pace, which is something like 1 app a month with the occasional 2 to 3 apps per month.
You don’t have to plan out every single credit card you intend on applying for over the course of the next year; it’s perfectly fine to figure it out as you go. But it’s very helpful to have a general framework to work from when deciding on which banks to pursue.
This is my personal strategy that’s worked out very well for me. Obviously you’re free to form your own strategy but I think this is a good one.
Freestyling sounds like it could be a terrible idea when it comes to credit cards but I think it’s okay to be a little impulsive (within reason).
With this strategy (which really isn’t one) you basically follow an extremely loose plan that consists of applying for credit cards with the best offers whenever they come (or just whenever you feel like it). This can work for people but with a couple of caveats.
First, you still need to pay attention to the credit card application rules. For example, if right out of the gate you applied for three Amex cards and two Citi cards because they had great offers before ever trying Chase, I think that’d be a huge mistake. But if you jumped on three Chase cards like the Reserve, Preferred, and Ink for your first three apps because they had great bonuses and because of the 5/24 rule, that would make a lot more sense.
Second, it’s best to go with cards that offer flexible transferring ability when free-styling. Since you likely don’t have any specific travel plans with this method you probably will benefit most by having the maximum level of flexibility with the points when you earn them. So cards from Chase, Amex, and Citi would probably serve you better over co-branded cards like IHG, United, etc. (although that’s not always the case).
If you want to get “advanced” with your credit card apps you can check out my strategy for applying for credit cards based on your travel destination.
The idea is that if you know where you want to go or at least have a general idea on the region, you can utilize sweet spots in award charts to make it easier to earn the right kind of points. This method requires you to have a pretty good understanding of award charts and airline alliances, so if that’s a bit over your head you may not want to go this route.
However, if you’re up for it, this can be a good way to manage your credit card applications so that you 1) know you’ll have enough enough points to get where you want to go and 2) earn those points while taking valuable short-cuts that maximize value. I recommend following this method along with the slow and steady strategy for maximum results.
Travel and purchase protections
Most travel rewards credit cards offer an array of travel and purchase protections. You should be on the lookout for the following protections:
- Car rental insurance – primary rental car insurance is the best (offered by some Chase cards)
- Purchase protection – if item is lost or stolen usually within 90 days it well be covered up a certain amount
- Extended warranty – will usually add 1 to years to warranties
- Price protection – will allow you to receive difference of price if price of product goes down
- Return protection – Reimburses you for items that the store won’t allow you to return
- Roadside assistance – usually offers complimentary service when you need fuel, have a flat tire, etc.
- Travel accident insurance – reimburses you when you experience tragedy
- Lost or damaged luggage – covers you for expenses (usually to to a couple of thousands bucks) when your luggage is lost
- Trip interruption/delay – when your travels are delayed up to a certain point you can get things like meals and lodging covered
- Baggage delay – when your bags are delayed substantially you can get reimbursed for essential items, such as clothes, toiletries, etc.
If you’re new to this, you probably had no idea that so many different protections are offered. Not every card will offer every protection and of course they all come with specific terms and conditions. However, you should be able to find the language for these benefits in the terms of the credit card offer online before you apply in order to see which cards offer what protections.
Are inquiries combined?
You should always be aware of whether or not the credit bureaus combine hard inquiries for multiple applications. This means that is you apply for two or more cards within a short time-frame your credit report will only show one hard pull. It’s best to do the apps within minutes of each other but sometimes they will still combine even if made hours apart. Some banks that are known to combine hard pulls are Chase, American Express, and Bank of America.
You want to be a little careful with combining hard pulls because sometimes if you combine too many hard pulls at once, it can raise red flags.
Make sure you know how the annual fee works. First, check and make sure that the annual fee is in fact waived if you think it’s supposed to be. Sometimes cards that appear to be the same offer will include an annual fee. Second, make sure there isn’t an in-branch offer with no annual fee or a reduced annual fee (like we see with the Chase Ink). Finally, make sure you’re aware of when the annual fee will hit. This is usually after the first statement closes.
A lot of cards offer extra points when you add an authorized user. Thus, you should always consider whether or not you should add someone and who you might add. Remember, if you give them a card and they put spend on it, you’re ultimately responsible for the payment — not them! Also, some cards charge to add additional authorized users so you need to consider if it’s worth paying for the additional fee.
Finally, sometimes adding someone as an authorized user may not be in their best interest. For example, usually the Chase 5/24 rule will factor in authorized user accounts, so if your potential authorized user is just beginning with you, you probably wouldn’t want to add them.
Downgrades, product changes, and cancellations
Each time you apply for a card you should at least be aware of the potential for downgrading, product changing, and cancelling.
Remember, you want your credit history to age so cancelling is really a last resort that should only be done to open up valuable opportunities in the future. Most cards offer options for downgrading or product changing to a no annual fee card after having the card for 12 months. This means that you can avoid the annual fee on most travel cards. You should be thinking about what you’re going to be doing with your cards 12 months down the line. For one, you probably want to avoid getting hit with a bunch of annual fees at once.
But also from a strategy standpoint, sometimes you’ll need to product change to get a bonus again or avoid downgrading/product changing to avoid reseting timers for obtaining repeat bonuses. Other times you might be losing benefits or bonus earning potential that you’ll want to make up with another card after you downgrade. What’s best for you will always depend on the card, but you should at least be thinking about these things when you apply.
Sign-up bonus vs bonus spending
Fortunately, some cards like the Chase Sapphire Reserve have it all: a great sign-up bonus and great bonus earning potential with 3X on travel and dining. But sometimes you’ll run into a card with a great sign-up bonus that may not offer you the best earning potential based on your spending habits. You’ll always have to make a judgment call but in the beginning I would probably prioritize sign-up bonuses over bonus spending categories. For example, the Amex EveryDay Preferred is one of the best high-earning cards when it comes to bonus earning, but it might make sense to pursue other cards with high sign-up bonuses in the short-term before going after the EveryDay Preferred’s earning potential for the long-term.
The exception to this would be situations where you need to jump on a good bonus earning card before you’re not allowed to be approved for the card due to a credit card rule. For example, the Chase Ink or Freedom cards can be great long-term earners that you may want to jump on before going for better sign-up bonuses.
Understand the value of premium cards
You want to make sure that you truly understand the value of premium “benefit-based cards” that offer you exceptional benefits but come with annual fees of over $400. It’s really easy to be turned off by these cards at first glance but if you understand the value that can be had with these cards, you wont be so quick to dismiss them. So make sure you understand how valuable these cards can be with things like travel credits, lounge access, and hotel perks, protections, etc. all factored in.
For more on specific articles on these cards check out:
- The Chase Sapphire Reserve vs The American Express Platinum Card
- The Chase Sapphire Reserve vs the Citi Prestige: Which is Better?
- Choosing Between the Sapphire Reserve, Prestige, Platinum, and Ritz-Carlton Credit Cards
- Does it Make Sense to Keep the Amex Platinum, Sapphire Reserve, and Citi Prestige?
Keep records of everything
You want to keep records of everything! Screenshots of the offer you are applying for. Screenshots of chats. Notes of what the rep tells you on the phone. What you’re wearing that day. Take it all down.
The need for screenshots is especially necessary if it’s a “flash offer,” meaning an offer that just suddenly appears and that others are going into a frenzy over. There’s a chance the offer could’ve been leaked and you’ll need proof that you had access to the offer once it’s pulled. In addition, make sure that nothing in the bonus terms change from the time you click on the application link to the time you hit “submit” Some leaked offers can be glitchy and can redirect your app without you realizing.
Mark down your application date/the date of approval and what your minimum spend requirements will be. These dates will be important so that you can keep track of when you’ll need to meet your minimum spend and also for later reference when you’re trying to count how long it’s been since you’ve opened up a card. Sometimes when you’re applying for several cards it can be easy to forget what card requires what spend amount and the mailings you receive don’t always state your sign-up bonus information so be sure to take it down.
Know how to handle a recon call
Once you start applying for a lot of cards, it’s imperative that you know how to handle a reconsideration call (or “recon call”). It probably won’t be a big issue for your first few apps, unless you have some negative marks you need to explain away. However, once you start racking up the inquiries and new accounts you’ll start having to deal with the inevitable recon calls.
These are calls you have to make when your application goes to pending or even when it’s denied. You’re basically calling to offer explanations for why you wanted the card and to explain away things like why you’ve opened up 16 cards in the last 9 months. These calls don’t always work out in your favor and a lot of times it depends on the judgment of the phone rep but knowing how to handle these calls will provide you with a helpful edge to increase your odds of receiving a favorable outcome.
See articles on recon calls here:
- My Roller Coaster Ride with Citi Reconsideration
- What to Expect in a Chase Business Recon Phone Call
At this point, you’re just about ready to apply! My last bit of advice would be to get on one of the forums listed in Step 2 and ask questions about your proposed credit card applications. You’ll get the most help if you have proposed travel plans to go along with the cards so that other readers can tell you if those cards will be good for you.
A lot of blogs get commission when you use their links to apply for credit cards. If a blog has been especially helpful to you, consider giving back and using their referral link. Just make sure it’s for one of the best offers; sometimes blogs will promote sub-par offers because the banks didn’t dish them out a promotional link for the higher offer.
Once you’ve gone through all of these things you should be ready to cross your fingers and apply!
Daniel Gillaspia is the Founder of UponArriving.com and the credit card app, WalletFlo. He is a former attorney turned travel expert covering destinations along with TSA, airline, and hotel policies. Since 2014, his content has been featured in publications such as National Geographic, Smithsonian Magazine, and CNBC.