Today I'm going to show you exactly how to climb the credit card ladder starting from
the most basic credit builder cards going all the way up to the most exclusive credit
card products on earth that can earn you 10s of thousands of dollars in cash back and free
rewards.
Alright, let's jump right into it.
what is going on everyone I hope you are all having a fantastic day.
So let's not waste any time, Tier 1 is going to be what I would call subprime and credit
builder cards.
And this is a product that is really targeted at individuals who either have no credit history
at all or damaged credit history and usually these products offer little to no rewards
but they have no annual fee and are a free and easy way to start building your credit
score.
This would include things like the chime credit builder, the extra credit builder, Credit
Sesame credit builder, Varo believe credit builder, and even a standard secured credit
card like the Discover it secured card where you are essentially borrowing your own money
each month so you would put up $300 in exchange for a credit card that has a $300 limit and
if you decide to not pay back your balance then the credit card company just keeps your
security deposit and that's the end of it.
So if you are brand new to credit cards and you want a safe and free way to start building
your credit score or rebuild damaged credit the subprime and credit builder cards in Tier
1 are the best option.
However, you may actually be able to skip tier one entirely which is what I did and
move directly to tier two which would be the no annual fee, and basic rewards cards.
So Tier 2 usually consists of products that again have no annual fee and have basic rewards
that typically come to you in the form of cash back.
Right now there are really two different options with this tier we have the rotating category
cards like the standard discover it, chase freedom flex, and Citi custom cash cards which
offered you 5% cash back in specific spending categories that usually change each quarter
or in the case of the Citi custom cash card change based on where you were spending the
most money.
But you've also got the standard 2% cash back card which used to be just the Citi double
cash card but now there are a number of cards on the market that offer you that flat 2%
cash back across the board including the SoFi credit card and Wells Fargo active cash card
among a few others.
So again depending on your income and other financial metrics you may be able to skip
tier 1 entirely and go right for something like the discover each credit card or maybe
even these SoFi credit card.
It's largely going to depend on your financial situation but I was able to get these standard
discover it credit card not the secured version on my 18th birthday with little to no consistent
income and a credit score of 0 so it doesn't hurt to go ahead and apply for one of these
products see what happens and if you get denied you can always go down to tier-one build up
that foundation and then apply for some of the higher-end products.
And don't worry at the end of the video I am going to walk you through step by step
my exact suggestions on which cards to get in which tier in order to climb this ladder
as fast as possible.
Tier 3 is going to be the cars that offer those big welcome bonuses and this is where
we get into the transferable points which I'll explain more in a second.
So obviously tier 3 cards are going to offer better rewards and benefits which is the fun
part but they also have an annual fee that usually ranges from $95 to $300 per year but
again the rewards that you get from these cards if you use them properly will more than
pay for that annual fee in most cases.
In this tier we have two different product categories the first of which being cards
that offer transferable points.
Here in the United states there are four major players in the transferable point category
and that would be chase ultimate rewards, American Express membership rewards, Citi
thank you points, and Capital One miles.
I have personally used all of them and they all work in a very similar way in that you
earn points on your credit card and can in most cases redeem them directly through the
credit card providers travel portal or you can transfer those points to a number of transfer
partners which include major airlines and hospitality brands in order to maximize the
value that you're getting out of your points.
That’s getting a little bit in the weeds but I did recently make a video on how to
maximize the value of chase points specifically so definitely check that out and let me know
if you have any questions.
But right now the best tier 3 cards that offer transferable points would be things like the
chase sapphire preferred, American Express green or gold cards, the Citi premier, and
the Capital One venture card and I would also kind of put the venture X card in this category
which is the more premium version that costs $395 per year currently.
However, after using that card for a while myself, I would actually put that in the next
category which will get to in a second.
Now outside of these transferable point cards into your three you also have the brand specific
cards which would be airline and hotel cards that offer free stays, free checked baggage,
priority boarding, travel credits, and a lot of times have really fun and compelling signup
bonuses.
Typically these cards are issued by a major credit card provider like chase or American
express but they are under the airline or hospitality brand so this would include things
like the Hilton Honors American Express card, the Marriott Bonvoy boundless card, or the
delta SkyMiles gold American Express card.
The combinations with this sort of card are endless and there are so many to choose from
so if you fly with the same airline consistently or stay at the same hotel consistently then
one of these cards might make a lot of sense but in my experience, it's better to just
get one of those transferable point cards and then you can apply those rewards too a
number of different airlines and hospitality brands without being locked into just one
option.
Alright Next up we're moving into the big hitters with Tier 4 and these would be the
premium travel rewards cards that offer you airport lounge access, elevated status with
different airlines and hotel brands, but of course, come with some pretty substantial
annual fees.
Now I am currently into your 4 and it's unlikely that I will ever move on to tier 5 which we'll
talk about next but currently, Tier 4 includes things like the American Express platinum
card, the chase sapphire reserve, and the Capital One venture X although again that
is sort of a light version of Tier 4 since the annual fee is only $395 per year.
I say only because something like the American Express Platinum card is currently $695 per
year but that card specifically offers a ton of different travel credits that if used in
their entirety equate to nearly $1,500 in value, not including the signup bonuses and
point multipliers that you get with this card so again if you use it a lot it's actually
pretty easy to justify that high annual fee.
Cards in this Tier 4 category are nearly impossible to get as a first credit card and you will
also likely need to have an average to above-average consistent income in order to get approved.
I have done full reviews on all three of the Tier 4 cards that I just mentioned
and a number of comparison videos but at the end of the day they all work in a very similar
way and it really just depends on what you were looking to get out of your premium products.
One thing I will mention though is if you are interested in the chase sapphire reserve
and potentially getting multiple cards the advice I always give is to start with the
chase credit cards first because they do have that 5/24 rule where if you've opened five
or more credit cards in the past 24 months then you will automatically be declined from
any chase credit card product so if you're thinking about getting multiple credit cards,
especially on the Tier 4 end of things then I would start with Chase and then apply for
some of the other products.
Alright so like I said tier four is where I will probably stay for the rest of my life
and I'm totally okay with that but there is the elusive tier 5 which would be the invitation
only black cards that includes some of the most exclusive credit card products on earth.
I have made an entire video about some of the most expensive credit cards on earth that
is really interesting so definitely check that out but this would include things like
the American Express centurion card, the Dubai royal first card which is made of gold and
literally has a diamond embedded in the card and I would even throw in something like the
crypto.com Obsidian card which is technically a debit card but you do have to have hundreds
of thousands of dollars invested with them in order to get this product so I would definitely
put it in tier 5.
By far the most popular tier 5 card would be that American Express centurion card which
again is invite-only and the rumor is that you have to spend at least $350,000 per year
on other American Express cards just to even get an invite for the centurion so again not
a tier of credit cards that I will likely be getting in the future but if any of you
have these then I'd love to know what it's like to live like the other half.
Alright so we moved pretty quickly through all of that and I know I threw a lot of different
credit card options at you but here's the quick crash course on exactly how to climb
that entire ladder that we just laid out.
Like I said if you're starting from Ground Zero I would try to skip tier one if you can
and go right for something like the discover it credit card.
You're likely going to have a low credit limit no matter what and if you are declined you
can always go for one of those credit builder products and use it for a few months and then
go back to Tier 2 but as long as you have decent income you should have no problem getting
one of the Tier 2 products right out of the gate and after using that for a few months
you were then ready to start climbing the latter at a rapid pace.
Once you've built up a decent credit score of at least high six hundreds to low seven
hundreds which shouldn't take more than a few months if you're using this card properly
then I would go for either the American Express gold card or you can shoot for the moon in
tier 3 and go right for something like the Capital One venture X card since again that
teeters on the edge between tier 3 and tier four.
That is going to have a higher annual fee but it gives you some of those premium travel
benefits without costing $700 per year like some of the products in tier four.
Personally, I don't think having multiple tier three or Tier 4 cards gives you that
much of a benefit especially considering they can cost a lot of money so I would pick out
one of the tier 3 cards in my case I have the American Express gold card and once you've
used that for a good while then you can go ahead and apply for the American Express platinum
card or sapphire reserve if you feel like that is necessary but for a lot of people
tier 3 is the place to be…it doesn't cost nearly as much money and you still get a ton
of fantastic rewards and the ability to transfer your points to a number of different travel
partners.
No you're not going to have airport lounge access with something like the American Express
gold card but unless you travel a lot, any of those tier three cards would be just fine.
I'd love to know what you think of this credit card ladder and which the products we mentioned
is next up on your list.
Be sure to check out some of my favorite financial tools using the links down in the description
below many of which will give you some free cash which we always love and of course thank
you so much for your time I really do appreciate it so much take it easy and I'll see you in
the next one!