Choose a credit card that matches your life stage
As your finances change, it can be wise to change your credit choice, too
By Erin Peterson
As you move from a minimum wage summer job to your first full-time job in a cubicle to top dog in the corner office, it's clear that your financial position changes over time. Oftentimes, however, your credit cards don't change when your financial situation does.
That may be a mistake, says Aaron Patzer, vice president and general manager of personal finance at Intuit (and former CEO of Mint.com) "It is reasonable to change [your credit card] as your life changes," he says. "Optimized credit relationships can mean hundreds or even thousands of dollars in rewards in what you spend."
Choose your life stage and your financial position, and sign up for the credit card that will benefit you most
Life stage: Young adult
Financial position: You may be scraping by on a college-student budget or making your way in the world with your first job, but either way, money's tight. You're just learning the ropes with credit, and you'll need a card that encourages (or forces) you to spend within your means.
What to look for: Try a credit card with training wheels, says MSN Money columnist Liz Weston, author of "Your Credit Score." "If you can't talk your parents into co-signing a card for you or being added as an authorized user, then a prepaid card is probably the way to go," she says. A prepaid card is linked to money you put up as collateral. In essence, you're borrowing your own cash. Though you'll lock up your money with the card, it will ensure that you don't get in over your head -- and you'll start building your financial skills so that you won't make missteps when you start walking on the credit tightrope without a similar financial net.
Also consider: Think you're plenty responsible with your money already? Then grab a card with an annual fee that's less than $75 and that will reward you for the things you're most likely to buy at this age, such as books, music, and movie tickets. Just be warned that your first credit card will most likely come with a very low credit limit, which should increase over time as you use the card responsibly.
Good choices: For a good secured card, your best bet is usually at your local credit union. Otherwise, the Public Savings Secured Visa is a good choice -- with the exception of a $79 sign-up fee, there are no monthly or annual fees, a reasonable 11.24 percent interest rate, a 25-day grace period, and a promise to report to all three credit bureaus to build your credit score. If you qualify and know you can pay off your monthly bills, Citi mtvU Platinum Select is an unsecured card that offers five points for every dollar spent in restaurants, bookstores, movie theaters and music stores.
Word of warning: After Feb. 22, under the new Credit CARD Act of 2009, students under 21 will not be able to qualify for credit cards unless they can show proof of income or have an adult co-signer.
Life stage: Young families
Financial position: In your 30s, you'll likely begin to juggle many more financial responsibilities, from a mortgage to child care to college savings. You'll be trying to squeeze the most out of every dollar you spend. With so many financial obligations, you may be relying heavily on credit to help you through the month and working to pay off credit card balances that have ballooned.
What to look for: Find a card that minimizes the consequences of your debt and spending, says Samir Kothari, co-founder of BillShrink.com. "If you're still getting on your feet financially, you'll want to optimize your card for the total cost of ownership, which means looking at the interest rate and fees," he says.
Also consider: If you pay off your balance each month, then consider a card that helps you multitask with your finances with rewards that go straight to your home mortgage or a 529 college savings plan.
Good choices: For those working to pay off balances, the Simmons Visa Platinum offers a low 7.25 rate, no annual fees and no balance transfer fees. There are no rewards, but that shouldn't be your focus if you carry a balance. Looking to squeeze the most out of your card with good rewards? The FutureTrust MasterCard deposits 1 percent of purchases into a college savings account for your kids. If you've got a mortgage through Wells Fargo, the Wells Fargo Home Rebate Visa will contribute $25 to the principal of your mortgage every time you reach $2,500 in purchases.
Life stage: Career zenith
Financial position: With luck, you're now reaching your prime earning years-- and your credit cards can help you make the most of them. Many people find themselves on the road more than ever at this stage of life, whether it's to travel for a business presentation or to enjoy a well-deserved vacation, so take advantage of your time away.
What to look for: Spending with the right card can help make days on the road a bit more palatable, says Patzer. "Travel reward cards are key when you're at this stage of the game," he says. "Often, the frequency of flying, paying for cabs and dining out on the road can add up to help pay for an entire vacation." Some premium cards offer special perks like airport lounge access or concierge service to make your trip go smoothly from beginning to end.
Also consider: If travel rewards aren't your style, grab cash and plenty of it. You'll be more likely to qualify for cards with top financial rewards with a good credit history and background.
Good choices: If you're willing to shell out the hefty $450 annual fee, the American Express platinum card offers some sweet deals: You'll get complimentary access to airport clubs, hotel room upgrades and access to travel consultants to plan your perfect trip. Want cash instead? The Fidelity Rewards American Express card offers a remarkable 2 percent cash back, which is deposited into a Fidelity account of your choice.
Life stage: Retirement
Financial position: By now, you likely have a clear sense of your finances, and with luck, you don't have any revolving debt. That means you can focus on rewards that'll enhance your golden years. Maybe you'll finally have time to do that months-long trip around the world -- or a summer-long RV trip across the country. But if you're not at home, who pays the bills?
What to look for: In these circumstances, convenience and account integration is key, says Cate Williams, vice president of financial literacy for Money Management International. "Start looking for a card that can tie together with your money market account and checking account, for example," she says. "If you're going to visit the world's largest ball of twine in your motor home, you want to be able to stop at a coffee shop, log on, move money from your money market account to your credit card and go. It's much easier to manage."
Also consider: If you're not planning epic journeys, you may want to use a card that will pay for pursuits closer to home, like meals out, books or home and garden supplies.
Good choices: If you do all of your banking at one place -- especially if it's a major national bank, such as Wells Fargo or Citi -- you should have no trouble finding a credit card that fits your needs, and it will be a snap to integrate all of your accounts. If you plan to go on cruises, the SeaMiles Chase Visa offers extra points for booking cruises, spending onboard or any travel purchase for items like hotels, car rental, and airfare. Otherwise, the Citi Forward Visaoffers five reward points for every $1 you spend on restaurants, books, and movies.
See related: Before choosing a card, know your credit card personality, What's your sign? Zodiac credit cards, Chart: Compare some of the best rewards cards
Published: January 29, 2010