Best credit card to build credit

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DepecheMode

DepecheMode

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Long story short I'm looking to build some credit by just buying groceries with a credit card and paying it off every month. Not too worried about cashback or any rewards stuff since I don't think I'll be putting enough on it to really build any rewards up. Any cards jump out that other students have found useful for this purpose?

@The White Coat Investor
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Disclaimer: I am no finance guru, just a guy slowly learning about my finances, etc, etc.

If it's your first credit card you could go w/ a secured credit card (w/ let's say a $500 limit) through your school's (or a local) credit union (or a bank, though they do tend to have higher rates). Do that for about a year (paying it off w/ fidelity each month), then you could upgrade to an unsecured one w/ a higher credit limit. Eventually you'll want to add other lines of credit (small loans, other credit cards, etc) - usually 2-3 lines of credit is all I can handle at this point in my training.

For more in depth analysis - I'll leave it up to the experts. Good luck.
 
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My amex gives 3% cash back for groceries (the best grocery rewards you will get) and they gave me the highest credit limit of any of my cards.

Discover gave me a lot of credit increases when I asked for them

Both Discover and Amex give you a monthly fico score, so you can get a general idea of what your credit score is.

I also have Chase Sapphire, which you need to build up credit to get (but it is visa, which good to have for places that don't accept amex or discover)


Edit: if your only interest is building credit and you know you will not be buying anything you can't pay for, you would want a card with the highest credit limit and one that gives you a fico score to monitor, imo.
 
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Be aware of the difference between a "credit card" and a "charge card." Credit card you can blow through the limit and make minimum payments every month, however charge card (ex. Amex gold) you have to pay off what you spent each month.
 
I'm by no means qualified to give much financial advice, but I've had a discover card for about 6 years now. As mentioned, they give you a credit score every month. I've had reasonable unsolicited increases in my credit line (I never even come close to using 1/2 of my credit line). And, perhaps more importantly (to me at least), their staff has been extraordinarily helpful and kind on the few occasions I've had to deal with them.

Sent from my SM-G920V using SDN mobile
 
DepecheMode said:
Long story short I'm looking to build some credit by just buying groceries with a credit card and paying it off every month. Not too worried about cashback or any rewards stuff since I don't think I'll be putting enough on it to really build any rewards up. Any cards jump out that other students have found useful for this purpose?

@The White Coat Investor
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What do you need credit for? You certainly don't need it for student loans, and most people who have student loans will soon have excellent credit. This just doesn't seem to be an issue with most docs. They borrow too much and because they usually make the payments, they tend to have excellent credit scores without doing anything special.

But if your goal is to buy stuff on a card and pay that card back every month, in hopes of raising your score, then just put your gasoline on a card. That's the easiest way and you're less likely to overspend on gas than on a lot of other things.
 
Do you have any credit history already? If not, you'll have to get a secured card as others have mentioned.

If you do have a credit history, I'd personally recommend the discover card (1% cash back on everything+ 5% cash back on quaterly rotating categories + double cashback first year).

If you have solid credit, the 2% double cashback card from citi is your second best bet.

There's also a few cards out there that give a sizeable statement bonus if you spend a certain amount in the first ~3 months (Chase Freedom I believe is one).
 
I used capital one's secured master card. I had 0 credit when I was approved. They give you a small limit like around $200, but after about 6+ months of paying on time your credit score should go up and you can apply for a "real" one.
 
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If you or your parents have membership at Costco, get their brand new card by Citi. Two allowed per membership. It craps on everything else out there and no annual fee. 4% back on gas anywhere, 3% restaurants, 1% on all purchases.
 
I have no connection to these websites...but they are useful.

https://www.nerdwallet.com/the-best-credit-cards?trk=nw_gn_2.0#MonthlyBest

http://thepointsguy.com/top-deals-3/

But eventually when you do get good credit, you can get a few free trips a year by cycling through the sign up bonuses from various credit cards. Amex platinum just had one that gave 100K points, essentially worth $1,500 of free travel. But of course you are going to need to get great credit first before being eligible for any of these.
 
link2swim06 said:
I have no connection to these websites...but they are useful.

https://www.nerdwallet.com/the-best-credit-cards?trk=nw_gn_2.0#MonthlyBest

http://thepointsguy.com/top-deals-3/

But eventually when you do get good credit, you can get a few free trips a year by cycling through the sign up bonuses from various credit cards. Amex platinum just had one that gave 100K points, essentially worth $1,500 of free travel. But of course you are going to need to get great credit first before being eligible for any of these.
Click to expand...

100,ooo miles? wow!
i have the Amex Platinum as well, even though it's a charge card ( you pay everything at the end of the month)
there's a lot of perks especially if you travel a lot.

sticking with the Amex family, the Amex Blue Cash is a very good credit card.
 
link2swim06 said:
you can get a few free trips a year by cycling through the sign up bonuses from various credit cards. Amex platinum just had one that gave 100K points, essentially worth $1,500 of free travel.
Click to expand...
Applying for/opening new cards and closing out cards all ding your credit score. Not worth it, IMO.

CapitalOne will give you an actual credit card (non-secured) even if you have somewhat questionable/non-existent credit. They also give you a free monthly fico score; pretty sure every major card does this now. Regardless of where it's from, your first card is probably going to have a terrible APR (~25%) and not offer any substantial rewards. Autopay the full amount every month for a year+, watch your score go up a bit, then you can start shopping for a better card. But remember, every time you apply, your report gets dinged, so be selective/realistic.

As for building credit off paying student loans, IME, that does not help your credit in the slightest, but not paying them will damage it. Just one more way student loans blow. Not to mention how they crush your debt to income ratio.
 
First card I ever got was a Discover student credit card. 5% rotating categories. Still use it for alot of things because the categories are good. Think I got that card with 0 credit.

I think its a waste to not pursue the best cash back/rewards card you can get. Its literally free money (back that is). First year with a credit card spending it just the same as a debit card and I made 220 in cash back. I think the earlier you learn about the different types of cards and how to use them effectively the better. I now have an Amex with 6% groceries/3% gas. Basically all I use it on. I think I have 450 in cash back in the first year of using it. All for things I will buy anyways. It has an annual fee but the math clearly works in my favor. My wife and I have 3 credit cards between us and we have probably 1k in cash back available right now.

Sure it opens up the risk of spending more, paying interest, etc. But those are personal things rather than any type of inherent issue with the card. An actual written out budget helps with this if you think you'll have trouble. I've never paid interest on a credit card and never should you. The only time I kept a balance was right before med school started and I had to wait on loans...luckily I had planned that with getting my Amex and had 18 months no interest.
 
The White Coat Investor said:
What do you need credit for? You certainly don't need it for student loans, and most people who have student loans will soon have excellent credit. This just doesn't seem to be an issue with most docs. They borrow too much and because they usually make the payments, they tend to have excellent credit scores without doing anything special.

But if your goal is to buy stuff on a card and pay that card back every month, in hopes of raising your score, then just put your gasoline on a card. That's the easiest way and you're less likely to overspend on gas than on a lot of other things.
Click to expand...

Well my credit score is sort of in the crapper because of an ongoing illness I suffered a few years back. I basically had just a bombardment of medical bills and lost track of a couple of them which I think hurt me. Everything is paid off now. Do you think by making payments on my student loans during residency that will be enough to bring my score up by the end of training when I might be ready to purchase a home or car? I just don't want to have my parents cosigning on every purchase I make when I'm in my mid-thirties.

Thanks all for your suggestions...it's helped out a lot!
 
DepecheMode said:
Well my credit score is sort of in the crapper because of an ongoing illness I suffered a few years back. I basically had just a bombardment of medical bills and lost track of a couple of them which I think hurt me. Everything is paid off now. Do you think by making payments on my student loans during residency that will be enough to bring my score up by the end of training when I might be ready to purchase a home or car? I just don't want to have my parents cosigning on every purchase I make when I'm in my mid-thirties.

Thanks all for your suggestions...it's helped out a lot!
Click to expand...

What the heck do you need credit for to get a car? An attending physician typically makes $15-30K a month. Why not use that to buy a car? Are you planning on getting a Ferrari your first year out or something?

You certainly don't need to buy a home the second you get out of training. In fact, it's probably smarter to wait 6-12 months until you're sure you like the job and the job likes you. Buying a home before you have a stable job and social situation is a good way to lose money. Plus that gives you some time to save up a 20% down payment, saving you even more money.

You'll need a credit score of something like 740 to get the best rates on a house. I would think not missing any more payments between now and the time you're a year out of training would be plenty to get your score up. I mean, you're still a medical student, so that day is still 4+ years away at a minimum and people buy houses 2 or 3 years after declaring bankruptcy, short-selling a home, or getting foreclosed on all the time. All you did was miss some payments that you later made good on.
 
kmp0410 said:
First card I ever got was a Discover student credit card. 5% rotating categories. Still use it for alot of things because the categories are good. Think I got that card with 0 credit.

I think its a waste to not pursue the best cash back/rewards card you can get. Its literally free money (back that is). First year with a credit card spending it just the same as a debit card and I made 220 in cash back. I think the earlier you learn about the different types of cards and how to use them effectively the better. I now have an Amex with 6% groceries/3% gas. Basically all I use it on. I think I have 450 in cash back in the first year of using it. All for things I will buy anyways. It has an annual fee but the math clearly works in my favor. My wife and I have 3 credit cards between us and we have probably 1k in cash back available right now.

Sure it opens up the risk of spending more, paying interest, etc. But those are personal things rather than any type of inherent issue with the card. An actual written out budget helps with this if you think you'll have trouble. I've never paid interest on a credit card and never should you. The only time I kept a balance was right before med school started and I had to wait on loans...luckily I had planned that with getting my Amex and had 18 months no interest.
Click to expand...

I did the same thing in high school to start get my credit started. It's a good beginner's card, especially if you mainly only use it for the quarterly 5% bonus (which will be Amazon starting next week). Now I have that and a Visa through my bank that gets me 1.5-2% back on everything. So I use that regularly and the Discover for items I can get 5% back on.

Another thing to consider, some cards will have promotions to get you to spend more or use it more often. At one point my Discover card offered $500 cashback if I used it for $2,500 in purchases 3 months in a row. I was living with roommates and volunteered to pay our rent for those 3 months and they just paid me their share. Made an easy extra 500 without actually spending any more than I normally would have. Just something else to look into before applying for a card.
 
I built my credit by having only one card and only using it when I knew I could pay it back. My credit is amazing now
 
hurtem&healem said:
Applying for/opening new cards and closing out cards all ding your credit score. Not worth it, IMO.
Click to expand...

That's not really true.

My credit score is 822. I am in the top few percentile of the nation and have been signing up for 1-2 new credits cards every year for the past 5 years.

Actually the vast majority of the credit score is based on other things (like do you always make your payment, credit limit to debt ratio, etc.).

The key is that you have some long term credit cards you always keep to bring your average account age up.

Since turning 18 I have probably been through 15-25 credit cards (I'm 28 now)....and have 5 or 6 active ones now. I have probably received $5-10K in free stuff over those years. If you know the rules, you can play the game. And win.
 
The White Coat Investor said:
What the heck do you need credit for to get a car? An attending physician typically makes $15-30K a month. Why not use that to buy a car? Are you planning on getting a Ferrari your first year out or something?
Click to expand...

Because I can get a new car loan for an interest rate under 3%. I can make reliably 5-7% with short term investments. It makes more sense to hold onto my money and invest it instead.

Take a $30,000 honda. You can get a loan at 1.5% interest right now.

Over a 5 year loan you pay $1,157.80 in interest.

If you invested that in...lets say lending club at an avg of 7% per year. You would end up with with at least $3-5K, even after you paid $31,157.80 in car payments. Do this with every car you buy over your lifetime and you are looking at basically a free car by the time you retire.
 
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link2swim06 said:
Because I can get a new car loan for an interest rate under 3%. I can make reliably 5-7% with short term investments. It makes more sense to hold onto my money and invest it instead.

Take a $30,000 honda. You can get a loan at 1.5% interest right now.

Over a 5 year loan you pay $1,157.80 in interest.

If you invested that in...lets say lending club at an avg of 7% per year. You would end up with with at least $3-5K, even after you paid $31,157.80 in car payments. Do this with every car you buy over your lifetime and you are looking at basically a free car by the time you retire.
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Five bones I'd pick with your approach:

# 1 You're not accounting for risk. Getting 7% at Lending Club involves a lot of risk. Getting a 3% return by avoiding a car loan is guaranteed.
# 2 You're not accounting for taxes. After taxes, your Lending Club return might be 4-5%.
# 3 Lending Club isn't anywhere near a short term investment. I don't even think they do anything shorter than 3 years any more do they?
# 4 Behaviorally, few people actually do what you say you do. Most spend the money they thought they would invest. So you get the loan and you don't get the investment or all of the investment. That 3% return surely will outpace the return on your Mexican vacation.
# 5 If you could borrow your dishwasher at 3% would you do it? How about lunch? At a certain point, it's not worth the hassle. For me, a car comes in below that threshold. For you, maybe not.
 
link2swim06 said:
That's not really true.

My credit score is 822. I am in the top few percentile of the nation and have been signing up for 1-2 new credits cards every year for the past 5 years.

Actually the vast majority of the credit score is based on other things (like do you always make your payment, credit limit to debt ratio, etc.).

The key is that you have some long term credit cards you always keep to bring your average account age up.

Since turning 18 I have probably been through 15-25 credit cards (I'm 28 now)....and have 5 or 6 active ones now. I have probably received $5-10K in free stuff over those years. If you know the rules, you can play the game. And win.
Click to expand...
I don't feel special with my 769 anymore.
 
Having several credit accounts really helps, so if you can get away with it you should get multiple cards at or near the same time, since your average age of accounts matters as well.

I have three cards - Discover IT, Chase Freedom, and Citi DoubleCash. the Discover and Chase cards have rotating 5% cash back categories that are different from one another, and the Citi card has 2% back on everything. At the end of the year it ends up being a nice chunk of change sitting in your rewards account.

Using them responsibly has increased my score by a LOT. As long as you don't overspend you'll see your credit go up fairly quickly.
 
The White Coat Investor said:
Five bones I'd pick with your approach:

# 1 You're not accounting for risk. Getting 7% at Lending Club involves a lot of risk. Getting a 3% return by avoiding a car loan is guaranteed.
# 2 You're not accounting for taxes. After taxes, your Lending Club return might be 4-5%.
# 3 Lending Club isn't anywhere near a short term investment. I don't even think they do anything shorter than 3 years any more do they?
# 4 Behaviorally, few people actually do what you say you do. Most spend the money they thought they would invest. So you get the loan and you don't get the investment or all of the investment. That 3% return surely will outpace the return on your Mexican vacation.
# 5 If you could borrow your dishwasher at 3% would you do it? How about lunch? At a certain point, it's not worth the hassle. For me, a car comes in below that threshold. For you, maybe not.
Click to expand...

I hear you....but a few thousands dollars for an hour or two of work to setup is worth it for me. Lending club is an example...more of a long term strategy...if you can make considerably more than you borrow you will have a net gain in the long run. It's easy to avoid that tendency to take a Mexican vacation if you put your money in an account that essentially locks up your money for a few years and doesn't give you access to it.

But to each their own...
 
DepecheMode said:
Long story short I'm looking to build some credit by just buying groceries with a credit card and paying it off every month. Not too worried about cashback or any rewards stuff since I don't think I'll be putting enough on it to really build any rewards up. Any cards jump out that other students have found useful for this purpose?

@The White Coat Investor
Click to expand...

Get the Capital One Venture Card!! I'm a P4 (pharmacy) **the fans begin to boo and throw tomatoes at the stage**.

You get 2% back on anything and it helps with travel. You might say, "Hey! I'm in medical school. I'm not traveling!" But... over time you keep putting money in and getting that 2% back.. BAM! By the time you start interviewing for residencies, you have a couple of your flights paid for.

I got mine last year and it has already paid for a $300 roundtrip to LAX from east coast for a pharmacy conference.. AND I have enough miles stored up that I could afford another flight or two (if given right price) which I will appreciate come interview time in February!

There is a start-up bonus as well.

Disclaimer: I use my card for everything and pay off the full amount always so if you're only using for groceries it might not help, but a good option nonetheless for students. There's also a $59/yr fee after the first year but it pays for itself.

**The boos die down and one fan in the distance begins a firm, audible slow clap that is embraced by the rest. The fans go wild.**
 
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