Just a reminder: All the information provided here are no official PennState recommendations, but just tips that have been useful for former and current physics graduate students. All information provided reflects the status when it was written, something might change in the future. It is therefore your responsibility to check if the information provided is still accurate.
Resources on credit cards
There are many different credit cards out there and there are many experts with different recommendations. There are several good resources on credit cards:
- Creditkarma [data by Transunion & Equifax]: Good website that allows you to see your Transunion Creditscore (and now also the Equifax score). It also recommends some credit cards for your profile (after you register) and has some good ratings/reviews on credit cards. However, check the recommendations yourself – not all of them will be optimal for students.
- Creditsesame [data by Experian]: Website that allows you to see an additional free Creditscore. It’s an additional bit of information, but the website itself seems rather useless and not very well organized.
- Mint [data by Equifax]: This is a great website to keep track of all your financial obligations (bank accounts, broker accounts, loans & credit cards). It’s very useful if you trust the company and allow them to access your bank data. Furthermore, it allows you to access a free Equifax credit score.
- Credit [data by Experian]: Another website that simulates a credit score based on the data from Experian.
- Quizzle [data by Equifax]: Another website that simulates a credit score based on the data from Equifax.
- MyFico: This is the only website that you don’t need to register for, if you just want to read tips/tricks of credit card experts. Many people are quite competent, even though it might look a bit crazy that they put their 10 credit cards with a combined limit of 30,000 USD in their signature.
- AnnualCreditReport: This website allows you to order once per year a free credit report from each of the three rating agencies Transunion, Experian and Equifax.
Rules for credit card use
If you want to benefit from using credit cards, there are a few rules:
- Make sure that you only use credit cards, for which you don’t need to pay interest on purchases until the Due date. Usually you get a credit statement at the end of the month, but you only need to pay within the next 20-28 days (check!). This is called grace period. Usually, you will only get this grace period if you have paid your balance in full by the due date of the month before. This means to avoid any interest, you need to do both: pay the balance in full in the current month and in the month before. JUST PAY IT ALWAYS IN FULL! Almost all credit cards offer this grace period of 20-30 days. You can learn more about how it works on this website. Please check the terms and conditions of your credit card. HOWEVER, if you don’t pay at this time you will need to pay interest starting at the day of purchase.
- NEVER pay late. ALWAYS pay your balance in full by the due date. If you pay late, you often pay 20-40 USD late fee and get a bad remark in your credit rating. If you don’t pay your balance in full, you pay 10-25% interest per year. That’s just ridiculous. If you want to buy items that you don’t have the money for, take a loan out (if it’s financially reasonable like buying a house to save on rent) or don’t buy it (if it is an expensive car for which you don’t have the money). Don’t be stupid and buy items that you can’t afford.
- Try to keep a small balance on all your credit cards that you pay off at the end of the month. This makes sure that the credit company won’t close your account and it will help your credit score.
- Keep your balance under 30% of your credit limit or maybe even under 15%. This is good for your credit rating. If you buy something expensive, pay off your balance immediately (before you get a statement).
- Check exactly the pricing of your credit card if you use it abroad. Cash advances should not be used anyway, but even using your credit card for a purchase in another country might lead to an Foreign Transaction Fee that can be very annoying (plus a currency exchange fee if you don’t use USD).
Step-by-step savings through credit cards
The following list of useful credit cards is a small step-by-step-list that gives recommendations how to quickly build a credit rating as PennState graduate student and save money by using reward cards that give CASHBACK. CASHBACK means that you collect points (usually 1 points = 1 cent and you get 1-5 points per dollar spent on the card leading to an effective discount of 1-5% on your purchases).
- WHEN YOU ARRIVE AT PENN STATE.
- PSFCU: Open a checking/savings account at the Penn State Federal Credit Union. When you are doing this, you can immediately apply for a credit card. If you explain that you are a PennState graduate student (usually paid by the university), you will usually get approved for a credit card with a 3000 USD credit limit. This is an excellent way to start off with a credit history.
- PNC: Open a checking/savings account at the PNC bank. It might be a good idea to check first online offers where you can get 100-300 USD for just opening the PNC Virtual Wallet account. On the other hand, these offers might not be available to incoming international students who don’t have a social security number yet. Check the internet. Either way, once you have a bank account with PNC for six month, you can apply for a credit card and will usually get approved for a limit of 500 USD. That’s not great, but it allows to start with two credit cards to build a credit.
- WAIT FOR 12 MONTHS. Wait at least six months with at least one of these credit cards, until you take further actions. Most lenders will demand a credit history of at least 12 months, but sometimes you might get a credit card earlier. It’s up to you if you try. People were successful with getting a Discover It credit card after 7 months, but Chase for instance usually declines people with a shorter credit history. After 12 months, you should be ready to apply for some of the higher tier reward cards that will give you around 5% discount on your everyday purchases. In particular, consider the following options. Both the following cards have zero annual fees.
- DISCOVER IT [150 USD signup bonus]: Discover it gives 1% discount on everything and 5% on categories that are changing every three months (usually for up to 1500 USD spent, that is you can get up to 75 USD cashback). Categories could be online retailers (like Amazon etc.) or Dining (most restaurants) or Gas / Ground transportation (gas & buses) etc. Getting 5% off is a good deal. Moreover, they have special promotions where you can get off even more, that is 10-25% on selected purchases. The only drawback is that Discover It is not everywhere accepted, in particular not very much outside of the US. Before you apply to Discover It, check online for special promotions. Usually, it is realistic to get at least 50-150 USD signup bonus if you use your card in the first three months for purchases of at least 500-750 USD (check the exact conditions). Google and the forums mentioned above will help you to find links to such deals.
- CHASE FREEDOM [200 USD signup bonus]: Chase Freedom is very similar to Discover it with the advantage that it is a regular VISA card and almost everywhere accepted. It gives 1% cashback on all purchases and 5% on special categories that are changing every three months (usually for up to 1500 USD spent, that is you can get up to 75 USD cashback). However, they are a bit more picky about your credit history (that should be usually at least 12 months). On the other hand, they have every few months (usually once in summer and once in winter) a special deal where you get a 200 USD signup bonus (instead of the standard 100 USD). Therefore, it might be always good to wait for such a special deal.
- WAIT FOR ANOTHER FEW MONTH. Make sure that your credit rating based on the other cards is really good. You can request free copies of your credit reports in this time, make sure that everything is correct and keep your debt/limit ratio at 10-20%. You can also check the free simulated credit scores from the websites mentioned above and you should have excellent scores of 700-800. Then you could start applying for the following cards. Some people recommend to apply at several/all cards at once, so that the hard inquiry of another application doesn’t appear on the reports. If you get approved, make sure that you can spend the necessary amount for the signup bonus within the necessary time. Read the offer details carefully. Usually, you need to make sure that you can spend 500-1000 USD within the first three month in order to get the signup bonus. There are usually good ways to spend this amount of money – for instance for airfare, travelling, Amazon gift cards or other products that you want to buy anyway. Don’t buy things that you don’t want, just to get the cashback bonus. All of the following cards have zero annual fees.
- SALLIE MAE [25 USD signup bonus]: The Sallie Mae Master Card is less well known, but an excellent choice for students. It offers 5% cashback on groceries (on up to 250 USD per month), 5% on gas (on up to 250 USD per month), and 5% cashback on bookstores (INCLUDING AMAZON PURCHASES, on up to 750 USD per month). This is an excellent deal for students because it means that you can get 5% on most of your daily expenses.
- CITI DOUBLE CASH [0 USD signup bonus]: The Citi Double Cash card is good for all expenses that don’t fall into a bonus category of another card, because it gives 2% cash back. You should only if you have an excellent score because it is not easy to get.
- CAPITAL ONE QUICKSILVER [100 USD signup bonus after 500 USD spent]: The Captial One Quicksilver Card gives 1.5% cashback and has the big advantage that it has zero foreign transaction fee. This means you can use this card outside of the US to make purcheses without paying fees. Of course, the currency exchange rate won’t be the current interbank rate, but including the 1.5% it might come pretty close to the interbank rate or even better. This means that’s an excellent travel card if you don’t want to get a bonus miles card which would be more advanced because it often has annual fees.
- AMERICAN EXPRESS BLUE CASH EVERYDAY [100 USD signup bonus after 1000 USD spent]: The American Express Blue Cash Everyday card is mainly useful to get the cash rewards and to increase your credit limit. This is because usually you get approved for a credit limit increase to three times the original limit after a few months. For instance if you start with 1000-2000 USD credit limit, you can increase the limit to 3000-6000 USD (namely three times the original limit). This has the advantage that also other creditors will be more willing to give you higher limits. Higher limits have the following advantage: Your debt/limit ratio decreases and even more important you can get higher level card version (for instance Visa Signature instead of Visa Platinum or MasterCard World instead of the normal MasterCard). These higher level card have additional peaks, such as product insurances (if your item breaks or gets stolen within the first few months after you bought it using this specific credit cards). Usually, you can only get the higher level cards if your credit limit is high enough (such as at least 5000 USD).
- AMAZON REWARDS CARD [70 USD signup bonus]: The Amazon Rewards Card gives you 3% cashback and 70 USD signup bonus. It’s not really useful because the Sallie Mae card gives you 5%, but you can just go for the signup bonus. You can cancel this card later again.
- BANK OF AMERICA REWARDS [100 USD signup bonus after 500 USD spent]: The Bank of America Rewards card is mainly nice, because you get 100 USD signup bonus. Beside that you should probably use the other cards. You can cancel this card later again.
- ADVANCED REWARD CARDS. The following cards usually require an excellent credit rating and often a credit history of several years. Furthermore, some of them have annual fees, so you need to carefully check if the expected savings outweigh the costs.
- Chase Ink Plus: This card is mainly for small businesses, but can also be acquired by some private people. It gives 5% on office supplies which includes Staples. The trick is that you can buy coupons for Amazon, Apple and many more items (including gas & dining) at Staples. That way you can get 5% discount on almost everything, but it’s a bit awkward that you need to first buy coupons and then pay with coupons in the appropriate shop. If you are at the point of getting this card, you might be wealthy enough that this hassle is just not worth the money you save. A detailed explanation of the deal can be found here.
- If you have tips that we should add, please let us know.
How does it work?
You might wonder how credit card issuers can give you such high discounts (of 5% on many purchases) or give you money for just signing up. Credit card companies make money in two ways:
- They charge merchants a percentage whenever a customer uses a credit card. In some sense, you therefore benefit from people who use cash because the merchant will make more money from them for the same purchases meaning he does not need to raise his prices as much as he would need to if everybody used credit cards. On the other hand, credit cards are convenient and it is very difficult to calculate/estimate/compare the flow of money between a world with and without credit cards. Either way, usually credit card companies only charge 2-3% of the purchase. However, they can also do special deals with certain merchants to give an additional discount on purchases of a certain merchant. For instance, it is likely that Amazon will support Chase’s and Discover’s special 5% periods because it means that more customers will buy rather at Amazon than at another place.
- They make a lot of money from people who don’t handle their credit well. As soon as you don’t pay off your balance on the due date, you pay a ridiculous amount of interest (10-25% interest per year is just incredible!). In order to have as many customers who can’t or forget to pay off their balance, the companies try to have as many customers as possible and encourage them to use their cards as much as possible. In particular, the signup bonus of 50-250 USD serves the single purpose of bringing you into the habit of using the card. Therefore, the money/discounts you can get from using a reward cards comes basically from all the other customers who are not good at managing their money. The reason you get it, even if you are handling your money well, is statistics: If the companies lose a bit of money (or break even or only make a bit of money) from many costumers, but make thereby sure that they also have those people as customers who pay a lot of interest for using the card, it’s good for the credit card issuer.
Is it morally correct to use credit cards? Well, it’s a tricky question. You can get an advantage by exploiting a system, at least a little bit. In some sense you get back some money that you lose because merchants raise their prices in order to cover expenses connected to allowing credit cards. Moreover, you make money from people who are bad at managing their money AND/OR just poor (and need credit for their daily expenses). It’s up to you if you want to be part of this.
None of the links provided on this website are partner links that give any advantage to either this website or to the reader. We encourage to use Google or other search engines to find the best deals for the mentioned credit cards.