Which American Express Card Is Best For Beginners?

A reader who is building her credit wrote me a note asking for help in choosing her first American Express card. I thought it would be helpful to discuss it for everyone.

Which American Express Card Is Best For Beginners?

Let’s understand her options.

I am relatively new to the credit card game and have less than two years of credit history. Currently, I only have a Chase Student Freedom card and a Chase Sapphire Preferred in my wallet. My credit score is 721.

This week I received a pre-approved offer in the mail from American Express for two cards, the Blue Cash Preferred^® Card (with a $300 cashback offer) and the EveryDay^® Preferred Credit Card (with a sign-up bonus of 30,000 Membership Rewards points). Both are appealing in different ways. I primarily put Amazon purchases and groceries on my card, totaling about $2,000 per month. I don’t go out to eat.

Then I received an American Express Gold Card offer with a sign-up bonus of 75,000 Membership Rewards points, but I am not pre-approved for it. 

Which AMEX card should I sign up for?

First, congratulations on the pre-approvals and on building your credit! Continue to pay early or on time and not utilize more than half (1/3 ideal) of your available credit and your credit score will continue to rise. You likely received pre-qualified offers, which do not necessarily guarantee approval, but are a good sign of it.

Second, each of the three AMEX cards you are considering has pros and cons. Let’s work through them.

Option One: Amex EveryDay^® Preferred Credit Card

Per your offer, the EveryDay Preferred card gets you 30,000 points to start and carries only a modest $95 annual fee. I personally value those points at 1.7 cents each, so that is the equivalent of $510 in travel. Membership Rewards points transfer to airlines, sometimes with transfer bonuses, which make this points currency particularly lucrative for me.

The card also earns 3x points per dollar on spending at grocery stores, with an annual limit of $6,000 plus 2x points on gas. 3X points per dollar is better than what Chase offers on your two existing cards (the Chase Sapphire Preferred offers 2 points dollar at grocery stores), so that gives you an avenue to spend it.

But there’s a catch. If you make at least 30 transactions in a billing period, you receive 50% more points. So let’s re-do the numbers.

Furthermore, as you build your credit up over the years and ideally upgrade to the Platinum Card one day, your points will easily transfer over.

Option Two: Blue Cash Preferred^® Card

This card also carries a $95 annual fee, but offers a $300 sign-on bonus after spending $3,000 within your first six months. Points are a depreciating asset, so cash in the hand is compelling. Furthermore, you will earn 6% back on groceries (on spending up to $6,000/year) and streaming subscriptions.

Considering you spend a good amount on groceries, that 6% rebate will amount to $360 per year, which is worth the equivalent of nearly 22,000 points based upon my 1.7 cent/point metric.

Option Three: American Express^® Gold Card

The 75,000 Membership Rewards points sign-up bonus is very attractive. You’ll have to spend $4,000 within three months to earn that bonus. You’ll also earn 4 points per dollar at grocery stores and the cap will be raised to $25,000 per year. The annual fee is $250.

You will also earn 4 points per dollar at restaurants (better than the Chase Sapphire Preferred), but I know you mentioned that you do not go out to eat. Travel booked directly with the airlines also earns 3 points per dollar. But let’s stick to groceries.

Grocery Breakdown

Let’s say you spend $12,000 per year on groceries. With the EveryDay Preferred card, you’d earn 18,000 points on the first $6,000 and 6,000 points on the second $6,000 (meaning you would not be wise to use the card once you go above $6,000). But assuming you put more than 30 transactions per billing period on the card, those 24,000 points become 36,000 points.

On the Blue Cash Preferred Card, you’d earn $360 for the first $6,000 and only $60 for the second $6,000.

The AMEX Gold would give you 4 points per dollar for the entire $12,000 or a total of 48,000 points.

Verdict: Gold, But Depends Upon Your Travel Preferences

I understand your primary concern that you do not want to be declined for a card. Unfortunately, you’ll never know until you actually apply. The chance that you received these offers in the mail and your credit score is over 720 is a good indication you will be approved. You are more likely to be approved for the EveryDay or Blue card, but you have to think both short-term and long-term.

You are just starting out and hopefully there will be plenty of time in the years ahead for Gold and Platinum cards from AMEX. If it comes down to just the Blue Cash Preferred or the EveryDay preferred, your choice really comes down to how much you value the points.

In either case, you’re going to shift back to your Chase Sapphire Preferred once you cross the $6,000 spending threshold with your groceries unless you get the Gold card.

CONCLUSION

This is a good predicament to have. Starting out your credit journey is a lot of fun and there is great potential, even during this uncertain time. While I am recommending the conservative path, you really will not go wrong with any of these cards. Any will help you to build your credit and pre-qualify for more cards as time goes on.

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