A recent study from Trans Union shows that millennials are not crazy about credit cards and tend to have fewer cards with lower balances than Gen-Exers did at their age.
While credit cards can be dangerous when used irresponsibly, they can also earn you major perks for travel, dining out, and even everyday expenses such as groceries and gas.
“When you are looking for a credit card, the most important factor to consider is the way that you currently spend money,” Kimberly Palmer, Nerdwallet’s credit cards expert, told INSIDER. “If you tend to spend on travel, then a travel rewards card could be a good fit for you; if you don’t travel much but spend on groceries, gas, and other everyday products, then a cash back card could be a better choice.”
Tim Devaney, a credit card specialist at Credit Karma, noted that some of the best rewards cards come with hefty annual fees — but for him, the rewards often outweigh the costs.
Here are some of the best credit card reward programs for young people, depending on how you spend your money.
If you travel a lot, the Chase Sapphire Reserve card is a favorite.
“Travel rewards definitely appeal to adventure-seeking millennials,” Palmer said. “The Chase Sapphire Reserve card, with its large sign-up bonus worth $750, lounge membership, and $300 travel credit, is a popular one.”
Devaney called it one of his favorite cards.
“Because it offers so many rewards and those points are worth even more when you redeem them toward travel,” Devaney told INSIDER. “You’ll earn 50,000 bonus points after spending $4,000 on purchases in the first three months after opening the card.”
“I admit the $450 annual fee made me think twice before I applied, but the $300 travel credit helps offset that,” Devaney said.
For a lower yearly fee, try the Chase Sapphire Preferred or the Capital One Venture card.
If you want a similar rewards structure to the Chase Sapphire Reserve but don’t want to shell out for the $450 annual fee, there’s the Chase Sapphire Preferred. It has a lower yearly fee of $95, which is actually waived the first year, Devaney noted.
Just like the Reserve card, you’ll get 50,000 bonus points for spending $4,000 in the first three months after opening — but you won’t get the $300 travel credit or quite as many benefits such as complimentary access to airport lounges or a $100 credit toward applying for TSA PreCheck, he said.
Then there’s the Capital One Venture card, which Palmer said has a flat rate of double miles for purchases plus a signup bonus worth $500. The annual fee is waived the first year and then it’s $95 after that — the same as the Chase Sapphire Preferred.
“NerdWallet recently found that on average, travel rewards card give cardholders $901 in value the first year and $277 in ongoing rewards in each subsequent year, so it’s definitely worth using a travel rewards card if you plan to hit the road,” Palmer added.
“When you’re shopping for a rewards card, you want one that gives you points you can use many different places,” he said. “That’s why a card like Chase Sapphire Preferred or Capital One Venture Rewards is often a better choice than an airline-specific or hotel-specific card. It gives you more options.”
If you just want no-frills, cash-back rewards, look at the Citi Double Cash.
“Everyone loves a cash-back credit card,” Schulz said. “They’re not sexy like miles and points cards, but they’re easy and rewarding. For most people, a set-it-and-forget-it card like Citi Double Cash is perfect. The card gives you 2% cash back on whatever you buy, whenever you buy it. No muss, no fuss.”
You get 1% cash back on every purchase and 1% back when you pay your bill on time.
There’s no annual fee and the average yearly rewards value is about $318, according to CreditCards.com.
If you’re constantly eating out and indulging in happy hour, go for the Capital One Savor Card.
For the foodies who refuse to apologize for dining out all the time, there’s a card for you.
The Capital One Savor Card “treats dining rewards as the main event, not an afterthought,” according to Nerdwallet.
This no-fee card offers 3% back on purchases at restaurants, bars, coffee shops, and bars, and you get 2% back at the grocery store as well.
You can also get a $150 cash bonus after you spend $500 on purchases within the first three months of opening the card.
If you cook most of your meals at home, check out the Blue Cash Everyday card.
If you find yourself spending most of your food budget at the supermarket rather than restaurants, you’ll want a card that gives you rewards for buying groceries.
The Blue Cash Everyday card from American Express is a top pick in this category, according to Credit Karma, because it has no annual fee and gives you 3% cash back at US supermarkets for up to $6,000 a year in purchases (then it goes down to 1%).
You can also score a $150 credit if you spend $1,000 on purchases within the first three months of opening the card.
If you don’t have the best credit score, use a secured card to build credit.
Some of the best travel rewards cards are only accessible to those with good or excellent credit scores.
“If you have crummy credit or are just getting started with credit, I always recommend a secured card,” Schulz said. “It works exactly the same as a regular credit card, except that the credit limit is set by a deposit that you put in with the bank. For example, you deposit $250 and that gets you a credit card with $250 limit. It’s not a ton of money, but that’s part of the point. It minimizes your risk and temptation while giving you a stepping stone card to help you build your credit.”
If you handle that card well for six months to a year, you’ll be able to move up to a card with better terms and rewards, Schulz said.
One option is the Discover it Secured Card, which requires a deposit of only $200 and has no annual fee.
Ways to improve your credit score include “paying off credit card debt, making on-time payments on all credit accounts, and checking your credit report to get rid of any errors,” Palmer said.
If you already have some credit card debt, a balance transfer card could be your best bet.
If you already have some debt you’re struggling to pay off, there’s a specific type of card for you.
“Look for a balance transfer credit card with a long 0% interest period,” Schulz said.
Balance transfer cards can help you pay off your debt faster by letting you transfer your balance to a new card at a lower interest rate.
If you transfer your balance to the Discover it card, for example, your interest rate is 0% for 18 months. This card has a $0 annual fee and you get 1% cash back on all purchases plus an additional 5% cash back at different places every quarter, such as gas stations, restaurants, grocery stores, or Amazon.com.
If you’re still in college, you can build up your credit with a Deserve Edu Mastercard.
“Unfortunately, many college students don’t have access to the best rewards cards out there because they don’t have a long enough credit history to show lenders they’re responsible with the money they borrow,” Devaney said. “Even if they have a stellar credit score, they’re still in college, and without a full-time job and a decent salary, they won’t qualify for most credit cards.”
That leaves you with the conundrum of needing good credit to qualify for the credit cards with the best rewards — but it’s difficult to establish good credit without a credit card.
But if you want to start building your credit to qualify for a better card down the road, one option is to get a student credit card.
The Deserve Edu Mastercard gets you 1% cash back on all purchases and comes with a subscription to Amazon Prime Student. There is no annual fee and no foreign transaction fees. This card does not require a social security number, which can make it an attractive card for international students.
But because they’re available to those with less credit history, these cards often have higher interest rates, according to Credit Karma.
“It’s important to keep in mind that no matter how good your credit score is if you don’t have a full-time job with a decent salary you might still be turned down for the best rewards cards,” Devaney said. “My recommendation is to focus on building credit while you’re still in college, so that once you graduate and find a job, you’ll have access to better credit cards.”
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