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With American Airlines completing its switch to a revenue-based frequent flyer program last summer, it’s official: actual flying is no longer the fastest way to earn points and miles. It’s been replaced by credit card use, thanks both to generous sign-up bonuses and lucrative returns on everyday spending. In order to take advantage of these offers, you need both a good credit history and decent spending power. This can make it hard for people just starting to build credit — like college students — to jump in.
You have to tread carefully when you’re starting from scratch. Like chutes and ladders, every application you submit has the potential to catapult you forward or drop you back. If you get denied on your early applications, it can make it even harder to get that first credit card, but a single acceptance can unlock many doors. It took me a lot of trial and error to figure this out, but here are the lessons I’ve learned along the way, all of which helped me go from no credit history to seven cards and more than 400,000 miles during my junior year of college.
1. Consider starting with a no annual fee card.
While there’s usually a correlation between a card’s annual fee and the benefits it offers, you shouldn’t completely overlook “free” cards. Especially for your first card, they represent a long-term investment in your personal credit. Average age of accounts, or how long your credit card accounts have been open, counts for 15% of your credit score. If you open a card with no annual fee, you can keep it open indefinitely at no cost and increase your age of accounts in the process — just be sure to use it once in a while to avoid having the issuer shut down your account for inactivity. These cards also tend to have lower minimum spending requirements for sign-up bonuses as well, making them even more accessible.
Here are a few options to consider:
- Amex EveryDay Credit Card from American Express — Currently offering a sign-up bonus of 10,000 Membership Rewards points after you spend $1,000 in the first three months. This card offers 2 points per dollar at US supermarkets on up to $6,000 per year and 1 point per dollar on all other purchases, plus a 20% bonus when you make at least 20 transactions in a billing period, bringing your earning up to 2.4 points per dollar at US supermarkets, and 1.2 points per dollar on other purchases. Not bad for a card that costs you nothing to carry!
- Chase Freedom — Currently offering a sign-up bonus of $150 after you spend $500 in the first three months. If you also carry a premium Ultimate Rewards-earning card such as the Chase Sapphire Preferred Card, Chase Sapphire Reserve or the Ink Business Preferred Credit Card, this $150 can be converted to 15,000 Ultimate Rewards Points. The card offers 5 points per dollar on rotating bonus categories — gas stations and local commuter transportation for the first quarter of 2017 — and 1 point per dollar on all other purchases
- Chase Freedom Unlimited — Currently offering the same sign-up bonus as the Freedom Card: $150/15,000 points after spending $500 in the first three months. It earns 1.5 points per dollar on all purchases, making it one of the best options for everyday spending.
Alternatively, you could pick a card that waives the annual fee for the first year, such as the Chase Sapphire Preferred Card or the Starwood Preferred Guest Credit Card from American Express. This gives you time to test out the benefits before deciding if it’s worth paying to keep it open.
2. Set reasonable goals.
Even though the incredible 100,000-point bonus is no longer available online, the Chase Sapphire Reserve is considered one of the best travel rewards credit cards to ever exist. If you’re new to credit though, you might not be approved for it and similar cards right off the bat. I applied for a lot of credit cards in 2016 — 9 to be exact — and the only ones I was denied for were the ultra-premium ones: the Citi Prestige and the Ritz-Carlton Rewards Credit Card.
Like the Sapphire Reserve, these cards each have $450 annual fees and offer generous benefits such as lounge access and travel credits, and banks want to limit them to customers with more established credit. I’ve been able to get large amounts of credit and multiple cards with very few questions, and the only trouble I’ve run into is with these premium cards. While they offer an incredible value, if you have a limited credit history, you have a lower chance of getting approved for a premium card. Why bother wasting a hard credit pull for a card you’re not likely to get, especially when there are so many other great options on the market?
The same logic applies to award redemptions; the first free trip you take might not be in Emirates first class, but that doesn’t mean you can’t indulge in some luxury. My first card was the Chase Sapphire Preferred, and I wanted to use the sign-up bonus to fly first class from Frankfurt to Delhi aboard Lufthansa’s flagship A380. I didn’t have enough points to book premium-cabin travel for the whole trip, so I compromised and flew to Frankfurt and back from India on paid economy tickets. I still got the Champagne and caviar treatment for a nice 8 hours.
3. Get creative with your spending.
When I opened my first card, the task of spending $4,000 in three months was daunting. There was absolutely no way I could do that on my own just by paying for groceries and restaurant bills. I had to get resourceful. Every time I’d go out to eat with friends, I’d always ask to cover the check and be paid back the next day. After a while, my friends grew to love avoiding the hassle of figuring out how to split the check. We’d just take a picture of the receipt and deal with it when we got home.
Same goes for Uber, concert tickets or any other large purchase you’re making in a group. If your friends have Venmo, getting reimbursed will be as simple as tapping a few buttons — much easier than figuring out how to split checks at the restaurant. Be sure to check out this TPG post for some more creative ways college students can leverage their every day expenses to meet signup bonuses.
4. Ask for help.
Depending on which card you pick, three months of groceries, Ubers and meals out might still not be enough. If you suspect that’s the case, consider talking to your family before you apply and ask if they’d be willing to help you out. If they agree, add them as an authorized user and ask them to charge their everyday spending to the card and simply pay you back before your bill is due.
The best part? You might even get bonus points for adding an authorized user! Adding an authorized user helped me meet the spending requirement on the Chase Sapphire Preferred, but be careful: while every dollar spent on an authorized user card will count toward your minimum spend for the sign-up bonus, you’re ultimately responsible for paying the bill, so make sure you only add people you trust.
5. Time your applications around purchases you’re already planning to make.
This one seems obvious, but let me illustrate just how easy it can make your life. My girlfriend recently got accepted to a study abroad program in Sydney. She knew she was going to have to book flights, probably about $1,000 worth. She opened her first travel credit card, the Chase Freedom Unlimited, and used that to buy her tickets. Since the card’s sign-up offer is $150 (or 15,000 Ultimate Rewards points) for spending $500 in the first three months, she earned her entire bonus on a single transaction.
Even better, she used the authorized user card she’d ordered for her dad to make the purchase — i.e., she typed his name in on the payment page instead of hers — and ended up earning another 2,500 points, for a total of 17,500 on a purchase she was going to make already. That adds up to 17.5 points per dollar for buying plane tickets, which is an unbeatable return. Lots of big purchases can work here. If you know you’re going to be buying a new laptop or cell phone, spending money to furnish a new dorm or apartment, or buying expensive textbooks at the beginning of the semester, consider applying for a new card 2-3 weeks in advance so you can leverage those purchases toward your sign-up bonus.
6. Have a clear goal.
It’s easy to jump at good offers and just start aimlessly collecting points, but it’s hard to stay efficient without a clear goal in mind. Whether you want to travel across the country or cross an ocean, spend some time picking a destination and calculating how many points or miles you’ll need to get there. That way you can start to really understand the value of each point as a fraction of the ticket you’re trying to book. If you’re at all like me, you’ll start to get antsy every month, waiting for your statement to close and your points to post so you can see how much closer you are to that trip of a lifetime.
7. Automate the process.
Between midterms and clubs and jobs and parties, you’re probably noticing that your life is busier than it has ever been before. I’ve found traveling to be one of the best ways to relieve that stress, and free travel to be hands-down the best way to relax. The last thing you want is to add another responsibility to your to-do list, so take every step possible to minimize the work associated with carrying a credit card.
The first and most important step is setting up autopay. Since payment history counts for a whopping 35% of your credit score — the largest of any category — you want to make sure not to be late on a single payment. Otherwise you’ll find that the interest charges and the damage to your credit score from late payments outweigh any rewards you’re earning. Autopay is your savior here, as on all major credit cards you can set it up to pay your statement balance in full each month. Of course, if you enable this feature you need to be sure there’s enough money in your banking account to cover each bill, so only do this if that won’t be an issue.
Now that you’re working to build your credit score, it’s also your responsibility to monitor and protect it. There are a few free apps out there that make this process easier, like Prosper Daily, which will notify you of any suspected fraudulent charges. and Credit Karma, which will give you weekly updates of your credit score along with a breakdown of what factors are affecting it. Discover also lets anyone (including non-customers) check their score for free.
This past year has been fun for me. Really, really fun. I’ve taken incredible trips that would have otherwise been financially prohibitive, and I’m not stopping anytime soon. I’ve had to adapt, going from 0 credit cards to 7 in nine months, and I’ve had to do it quickly. But the most important lesson I’ve learned is that there are offers out there for everyone, whether you have a perfect credit score or none at all.
Just because certain cards or flights may be out of reach until you get a little momentum going doesn’t mean there isn’t incredible value to be had. Pick your battles well, have a plan and watch those free trips pile up faster than you can figure out how to use them.
What are your favorite tips for building credit and collecting points and miles as a college student?
Featured image courtesy of UpperCut Images via Getty Images.
With great travel benefits, 2x points on travel & dining and a 50,000 point sign up bonus, the Chase Sapphire Preferred is a great card for those looking to get into the points and miles game. Here are the top 5 reasons it should be in your wallet, or read our definitive review for more details.
- Earn 50,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $625 toward travel when you redeem through Chase Ultimate Rewards®
- Chase Sapphire Preferred® named a 'Best Travel Credit Card' by MONEY® Magazine, 2016-2017
- 2X points on travel and dining at restaurants worldwide & 1 point per dollar spent on all other purchases.
- Earn 5,000 bonus points after you add the first authorized user and make a purchase in the first 3 months from account opening
- No foreign transaction fees
- 1:1 point transfer to leading airline and hotel loyalty programs
- Get 25% more value when you redeem for travel through Chase Ultimate Rewards. For example, 50,000 points are worth $625 toward travel.
- No blackout dates or travel restrictions - as long as there's a seat on the flight, you can book it through Chase Ultimate Rewards