Note: What follows is a message I sent today to my daughter. She has grown out of the student credit card we got for her when she started college. Today, this card seems inappropriate given her life and career. If this helps to draft a similar message to your son, daughter, or a youngster who benefits from your help, please take what you need and modify it to make this your message.
Putting aside the emergency CapitalOne family credit card for this discussion, you have at least two credit cards under your name. I am co-listed on at least one of them. These cards were originally opened when you were a student and were appropriate at that time regarding fees, credit limits, and building credit. Now, you have excellent credit. You are independent and don't need our help with credit anymore. So, this might be a good time to review what credit card program is more appropriate for your needs. It's also time to remove my name from these cards.
Here are a couple of things to think about:
Credit cards can have annual fees ranging from zero to $100 or more.
Credit cards can offer perks like air/hotel travel miles or points, cash back, and cruise points.
For cash back, different programs give you higher cash back based on what they want you to purchase more. For example, a Walmart or Costco credit card will give you more cash back if you shop at their store, up to a limit. It is the same with a gas station or a Best Buy card.
For the needs of Mom and I, since Mom and I travel often and try to maintain Mom's free companion travel, our card seeks to optimize miles on Southwest. We chose a card that works best for this. Your needs right now may be more about cash flow. So, a percentage of cashback on purchases might be more appropriate.
Credit cards change their fees and incentives on occasion. The user benefits get better and worse, but they do not change too quickly. A good choice today is probably good for several years. And don't drive yourself crazy trying to find the perfect card. It's hard to gather everything you need to make this happen. Right now, you simply want to get going in the right direction. You can always modify it later.
Related to this, I want to get you your "credit freeze" access info from the three credit bureaus so that when you apply for credit, you can make your credit profiles available for review. A credit freeze (which everyone should do, but most don't) dramatically reduces the chance of fraud. With a credit freeze, it is nearly impossible for a fraudster to open new credit without you knowing. That is why we have had no problems with unauthorized credit accounts, knock on wood. At the same time, several of my client's credit profiles were hacked - none were on a credit freeze. And all were very messy to fix.
Below is a ChatGPT query on what it believes is a good card for cashback today. These results change, likely every week. ChatGPT is not perfect, but it can be a good starting point. I would compare the results of whatever search you do to other highly regarded card brands like Walmart or Costco. Another resource is a tool called The Points Guy or nerdwallet.
At your age, I would stick with a VISA or Mastercard. American Express and Discover are used in fewer places, tend to offer fewer benefits, and can have higher fees. You can always add those later in life.
One last thing: continue using your credit card for any purchase you can that does not have a credit card fee charged to you at the time of purchase and pay off your card in full every month. Paying credit card interest charges on unpaid balances is going backward and very expensive. Debt like this does not feel good. You avoid interest charges entirely by paying in full at the due date.
If you want to talk about this, I'm always happy to help.
Love, mom and dad.
CHATGPT RESPONSE BELOW - SUBJECT TO CHANGE.
For someone who spends about $500 per month and seeks a credit card with zero monthly fees, here are some of the best cash-back options available as of July 2024:
1. Citi Custom Cash® Card:
- Rewards: Earn 5% cash back on your top eligible spend category each billing cycle (up to $500 spent), 1% cash back on all other purchases.
- Annual Fee: $0.
- Welcome Bonus: Earn $200 after spending $1,500 in the first 6 months.
2. Citi Double Cash® Card:
- Rewards: Earn 2% on every purchase — 1% when you buy and 1% when you pay.
- Annual Fee: $0.
- Welcome Bonus: Earn $200 after spending $1,500 in the first 6 months.
3. Wells Fargo Active Cash® Card:
- Rewards: Earn 2% cash rewards on every purchase.
- Annual Fee: $0.
- Welcome Bonus: Earn $200 after spending $500 in the first 3 months.
4. Chase Freedom Unlimited®:
- Rewards: Earn 5% on travel purchased through Chase Travel, 3% on dining and drugstores, and 1.5% on all other purchases.
- Annual Fee: $0.
- Welcome Bonus: Earn an extra 1.5% on everything you buy (up to $20,000 spent in the first year).
These cards provide strong rewards programs without annual fees, making them excellent choices for your monthly spending habits【6†source】【7†source】.
Note: The ChatGPT results were actual at the time of the query, but should not be relied on. It is used in this article for illustrative purposes only. Work with your professional advisor for specific advice on your credit card and financial needs.
About the author/planner/teacher
As the Founder and CEO of The Real Estate Whisperer™ Financial Planning, Rich Arzaga, CFP®, CCIM is a flat-fee financial advisor who provides advice only. By focusing solely on providing client-centered financial advice rather than managing investments, he ensures his undivided attention to his clients' needs.
Drawing on his extensive expertise, Rich provides valuable advice on various real estate topics, including buy-sell-hold strategies, tax-deferred and highly appreciated tax reduction strategies, real estate succession planning, and rental property cash flow analysis.
His exceptional knowledge and real estate strategies have earned him recognition in business and finance publications such as the Wall Street Journal, The New York Times, Newsweek, Kiplinger, and The Journal of Financial Planning. As an esteemed adjunct professor at UC Berkeley and UC Santa Cruz Personal Financial Planning programs, Rich has been Honored for his excellence in teaching.
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