Picking the best credit card for your needs can be a challenge, especially when credit card offers are constantly changing. If you’re in need of a new card and are asking yourself “which credit card should I get?”, there are a number of options for consumers of all background, regardless of your creditworthiness or history.
Of course, the more card options you have, the harder it can be to decide between different benefits, cash back bonuses, fees, and other perks. Whether you’re getting your first credit card or adding another to take advantage of a special points bonus, researching your options beforehand can make a world of difference for your credit score and the benefits you may enjoy while using the card.
Check out our guide below to learn how to choose a credit card and which cards may be best for you.
How Do You Want To Use A Credit Card
Before you submit an application for a new credit card, it’s important to determine what kind of cardholder you are first. Do you pay off your balances at the end of each month or do you carry a balance and tend to pay only the minimum amount required each month? Do you want a card that gives you cash back, points, or travel miles? Is your credit score high enough to warrant a premium card or do you need a credit card to help you improve your credit history? Are you willing to pay an annual fee for perks or will you take advantage of the card for a year and cancel when the fee kicks in? Your answer to these questions will determine what you should look for in a card.
Secured Credit Cards
If you don’t have a credit history, you may be forced to start with a secured credit card. Secured cards essentially require an upfront deposit, which acts as your line of credit. This is different than a debit card in that it acts as a credit card (with all the same, federally-mandated protections of one) and can be used to build or rebuild your credit history. You cannot withdraw more than what you have deposited, so you don’t need to worry about accumulating credit card debt.
However, the downside is that many secured credit cards come with annual fees. Since you’re basically borrowing from yourself, it seems a bit silly to pay an annual fee, but if you need to get your credit score up, then you may need to consider a secured credit card before moving onto bigger and better things.
Which Credit Card Is Best For Me?
If a secured credit card isn’t a good fit for your wallet and spending needs, a regular credit card is probably your best bet. But with dozens of cards flooding the market today, how do you decide which credit card is best for you?
There are a lot of similarities between major credit cards in the marketplace, but the little, nuanced differences in things such as APR or fee scales are what set apart the “good” from the “great” credit cards.
Fees, Fees, Fees
Fees come first, because you can’t avoid these like you could avoid paying interest by paying off your bill at the end of every month. Annual fees are what most people look to when they go out scouting for a new credit card. They generally range between $0 and $450 per year, depending on the card. The higher the annual fee, the more benefits you’ll probably have. For example, the popular Chase Sapphire Preferred card has a $0 introductory annual fee, then $95 after the first year, with benefits ranging from travel insurance to a generous points program.
Like Chase, some companies waive the annual fee for the first year of card ownership, but since you’re likely in this for the long haul, don’t forget to take annual fee comparisons into account when you’re shopping for credit cards.
Balance Transfer Fees
In addition to the base annual fee, most cards have balance transfer fees as well, assuming you may want to use that feature of your account. These generally range between 3% and 5%, and are applied when you transfer a balance from an existing card to a new credit card. If you never carry a balance, you can disregard these fees; otherwise, get ready to do a little math.
There are many benefits to transferring an old balance onto a new card, such as the lower interest rate or the 0% introductory APR that many cards offer, resulting in fewer interest payments once your balance has been transferred to the new card.
However, banks need to make money somehow, and the 3% to 5% fee on the balance amount will be tacked on as your one-time balance transfer fee. If the amount you’ll save on interest payments with the new card does not exceed the cost of this fee, you may want to stick with the old card instead.
Annual Percentage Rate (APR)
Once you’ve scoped out the fees for cards you’re considering, let’s talk about something a little more complicated: annual percentage rates. APR determines how much interest you’ll be paying, and if you’re someone who pays off their balance at the end of every month, then you don’t need to focus on APR as much. If you do carry a balance, there are a few ways to minimize the amount of interest you’ll have to pay.
For starters, many cards are now offering 0% introductory APR for the first 6 to 12 months of card ownership. This means you’ll be paying off your principal until the APR adjusts to the usual variable or fixed rate offered by the card. This sounds great, but don’t let the 0% APR trick you into getting a card that has a higher APR after the introductory rate phases out.
Best Rewards Credit Cards
If you’re fortunate enough to have a good or excellent credit score and tend not to carry a large balance, then perhaps you should consider applying for a rewards card. Card companies are getting more creative with their reward offerings all the time. Even if it’s just cash back on your purchases, rewards cards are definitely worth looking into.
The Sign-Up Bonus
Many cards offer a sign up bonus, whether it be tens of thousands of miles or points that can be redeemed for cash or gift cards. Most of these cards come with a spending requirement, such as $500 to $4,000 within the first three months of card ownership. Again, this is generally a better deal for those who pay off their balances in a timely manner; otherwise, getting a card for its benefits isn’t worth paying 30% interest on $3,000 in credit card debt.
Many rewards cards offer their own points system. At the base, you earn one point for every dollar you spend. Points tend to multiply when you use your card for certain purchases the card company is affiliated with, such as dining, gas, or travel.
Chase, for example, has its own Ultimate Rewards program similar to Discover. Cardholders who pay for their travel plans through this program get double the points, although you may want to do some math beforehand because company-run travel programs tend to be pricier than discount travel websites.
Once you have the points, what do you do with them? Many cards offer rewards through popular online shopping sites, such as Amazon and Walmart. For cardholders who don’t carry a balance, this is like getting free stuff just for spending money with your rewards card instead of cash.
Speaking of cash, many cards also offer a “cash-back” option, which usually ranges between 1% and 5%. It may not seem like much, but on big purchases, you’ll definitely notice your cash back bonus.
Best Travel Credit Cards
If you’re a frequent traveler, you might’ve experienced all kinds of problems when using a U.S. credit card overseas. If you don’t have a Visa or MasterCard, you might’ve had issues with finding vendors who accept your card, not to mention:
- foreign transaction fees, which are usually 1% to 3% for most credit card providers,
- countries that don’t even accept your card,
- and the added hassle of explaining to your provider that you’re going overseas.
Instead of constantly putting up with these headaches, you might want to get a travel credit card that is tailored for on-the-go types such as yourself.
The most obvious option is a card that offers frequent flyer miles. Some of the best travel credit cards include Citi HHilton Honors Reserve Card, AAdvantage Visa Signature, US Airways Premier World MasterCard and Gold Delta SkyMiles Credit Card. These travel cards come with additional benefits such as priority boarding, free checked baggage, double points on airline-related purchases, flight discounts, airport lounge access, and more.
But as a traveler, you need more than miles to make a credit card worth your while. Cards with no foreign transaction fees (e.g. Chase Sapphire Preferred or Reserve) make it much easier to travel abroad without getting stiffed every time you use your card.
Best Credit Cards For Students
In addition to previous discussions about credit cards for those with a limited credit history, did you know there are many credit cards out there designed specifically for students? The days of card companies preying on financially-ignorant college students with glitzy, high-APR credit cards aren’t entirely over, but for the most part, the industry has seen a shift towards creating credit cards better-suited for individuals who have a limited income but need credit to get by while they’re still in school.
The Discover It Card for students is one of the best student credit cards available. Not only are there no annual fees and a 0% introductory rate for the first six months, but it also functions as a rewards card that helps students build credit. You receive 5% cash back on purchases in certain categories and unlimited cash back on everything else. There are no foreign transaction fees, relatively low APR (12.99%-18.99% after the first six months), and paying late won’t raise your APR.
If the Discover It Card doesn’t sound right for you, there are other options for students, such as Capital One’s Journey Student Rewards card, Bank of America’s Americard for students, and Citi’s Dividend Platinum Select Visa Card for College Students.
The Best Credit Cards in 2019
Choosing the best credit card for you doesn’t need to be a complicated or frustrating process. There is such a variety of card options out there today that anyone – even those with poor or no credit – can find one that suits their spending habits and financial needs. As long as you do your research beforehand and inform yourself of the alternatives available, you’ll find a great card in no time.