4 reasons why you should choose a cash-back card for your first credit card - Business Insider - Business Insider

4 reasons why you should choose a cash-back card for your first credit card - Business Insider - Business Insider


4 reasons why you should choose a cash-back card for your first credit card - Business Insider - Business Insider

Posted: 21 Sep 2020 12:00 AM PDT

This page includes information about the Discover it® Cash Back and Discover it® Student Cash Back products, which are currently not available on Business Insider and may be out of date.

This article is brought to you by the Personal Finance Insider team. It has not been reviewed, approved, or otherwise endorsed by any of the issuers listed. Some of the offers you see on the page are from our partners like Citi and American Express, but our coverage is always independent. Terms apply to the offers listed on this page.

finance money bank banking banking credit card credit score investment payment american express cash preferred cox
Cash-back cards like the Blue Cash Preferred Amex are easy to use, and more affordable than premium rewards cards.
Crystal Cox/Business Insider

The first credit card I opened was the Discover it® Student Cash Back.

I loved the card at the time. It was easy to use, offered solid rewards, and taught me a lot about personal finance early in my life. The most important lesson being: always pay my credit card balance off on time and in full to avoid fees and keep my credit score high.

In fact, I still have the same credit card today. It's been updated to a regular Discover it® Cash Back since I graduated from college more than a few years ago, but other than the name change, it's the same card in terms of the rewards it earns me.

That's one of the reasons I love cash-back credit cards — they're a great first credit card to open and keep in your wallet forever. In fact, I think these cards are the perfect place to start if you're new to credit cards. Here are three reasons why.

They're easy to use

A cash-back credit card is one of the most basic and straightforward credit cards out there.

When using the card, you get rewarded on a percentage basis. For example, with a cash-back credit card that earns 1.5% back, you would earn $1.50 in rewards for every $100 you spend.

You have a wide variety of options

Cash-back cards are not only easy to use, but there's a large variety of them to choose from, including:

My Discover it® Cash Back is a rotating bonus credit card. It offers 1% cash back on every purchase, and every quarter it offers a different bonus category in which it earns 5% cash back on up to $1,500 in purchases.

On top of those major types of cash-back cards, there are various levels of cards to get approved for based on your credit score. For example, there are regular cash-back cards, student credit cards, and cash-back cards designed for people with a lower credit score.

Typically, the latter two are both easier to get approved for if it's your first credit card, but in general cash-back cards are often easier to get approved for than rewards credit cards like the Chase Sapphire Preferred® Card.

They typically have no annual fee

Arguably, this is the No. 1 reason that a cash-back card makes for a good first credit card, and it's important for two reasons.

For one, it saves you money. No one likes fees, and avoiding fees will keep more money in your pocket.

Second, it means you don't have to worry about canceling the credit card, which is huge when it comes to building your credit score.

One important metric in calculating your credit score is the length of your credit history. The longer you've had your credit card accounts open, the better — and opening up a no-annual-fee card as your first credit card ensures you never have to worry about canceling that card.

Compare that to if you opened a card with a $99 annual fee. If you cancel the card, you would shorten your credit history when it falls off your credit report in about seven years. However, if you keep the card forever, you'll be paying the $99 annual fee for the rest of your life.

They can be very lucrative

Sure, using premium credit cards is a great way to garner great rewards and enjoy benefits like statement credits and airport lounge access, but cash back cards can offer some great rewards too.

For example, if you used the Chase Freedom Unlimited® to earn 1.5% cash back on $12,000 in annual purchases ($1,000 per month) would yield $180 in rewards. All of that for simply using a credit card.

Plus, there are countless other perks like sign-up bonuses (sometimes as large as $200!), no foreign transaction fees (on many cards, but not all — so make sure to check), and more.

For rates and fees of the Blue Cash Preferred® Card from American Express, please click here.

Get the latest Bank of America stock price here.

Disclosure: This post is brought to you by the Personal Finance Insider team. We occasionally highlight financial products and services that can help you make smarter decisions with your money. We do not give investment advice or encourage you to adopt a certain investment strategy. What you decide to do with your money is up to you. If you take action based on one of our recommendations, we get a small share of the revenue from our commerce partners. This does not influence whether we feature a financial product or service. We operate independently from our advertising sales team.

Comments

Popular posts from this blog

Window for Small Businesses to Apply for PPP Funding Closes Saturday - Bay News 9

List of Easy Approval Net 30 Accounts for 2020 - Nav

This new business index offers a more accurate way to forecast recessions - MIT Sloan News