A complete guide to choosing and using credit cards
The right credit card can play an important role in helping you achieve your financial goals responsibly. But how do you choose among the hundreds of credit cards and offers available on today’s market?
Take a beat. Bankrate is here to help.
Do you want to earn cash back on everyday purchases? Upgrade your travel experience? Manage different kinds of consumer debt? Build or repair your credit? Whatever your objective might be, our expert analysis of leading offers from our credit card partners can guide you in the right direction.
We evaluate top cards in all the major categories — including rewards, cash back, travel and business — and narrow down the list to a select few. We also offer advice on how to best utilize a credit card as part of your overall personal financial profile.
Let’s get started.
‘Why should I get a credit card?’
Credit cards’ role in the transition to a so-called “cashless society” is evident in the number of chip readers, online payment portals and digital wallet interfaces most of us encounter every day. A Bankrate.com survey found that that owners of rewards credit cards who don’t carry a balance from month to month paid for these purchases with their cards a lot more often than with cash or a debit card:
|Type of purchase
||Paid with rewards credit card
||Paid with cash or debit card
Technology has made using credit much more convenient than in the past, and credit cards also feature built-in incentives such as:
- Rewards programs that earn cash back, travel discounts and more
- Security features that reduce your vulnerability to fraudulent charges
- Tools that help you build or repair your credit
So, should you get a credit card? The answer depends on your personal financial situation, your financial goals and other factors.
Do you need to build up your credit profile? Do you have responsible spending habits? Is the card for personal use or for your business? Do you want to earn rewards that will help you maximize the value of your spending? These are some of the questions you should answer as you compare the best credit card offers.
When credit cards are used responsibly and to their full potential, they can provide convenience and value you don’t get with other payment methods. To reap these benefits, you’ll first need to choose the right card and then use it the right way.
What’s the best credit card?
There’s no such thing as a one-size-fits-all credit card, and the sheer number of options can make it difficult to figure out exactly which one represents the best option for you.
We recommend using one of two methods to narrow down your choices:
- Choosing a card by category
- Choosing a card by credit score
If you want to take your search one level deeper, you can also factor in comparing the best credit card offers.
Generally speaking, the category method is well-suited for people with a solid credit history and a specific goal in mind: earning cash back, collecting points/miles to offset the cost of travel and so on.
The credit score might work well for two types of people: one, those who are focused on building their credit history or improving their credit score; and two, those who already have a good or excellent credit score and would like to upgrade from their current card and possibly qualify for a lower annual percentage rate (APR).
Choosing a card by category
If you’re choosing a card according to category, you’re probably interested in a card with a rewards program that matches your spending habits. Today’s credit cards cover a lot of territory for different types of consumers, including:
The budget-minded shopper
You can earn cash back on everyday purchases, and more, with a cash back rewards card. While some cards earn a fixed percentage on every eligible purchase, others offer tiered categories with higher rates tailored to specialty areas such as:
Seasonal shoppers whose spending habits change with the calendar might benefit from a rotating category card. This type of card earns bonus cash back rates on certain types of purchases at three-month intervals throughout the year.
The frequent traveler
If you want to earn miles and points to help offset the cost of travel, a travel rewards card should probably be at the top of your list.
Travel credit cards feature perks and benefits specifically designed to make the journey easier and more affordable, including:
- Access to private airport lounges
- TSA PreCheck or Global Entry application fee credits
- Baggage insurance
Many travel cards earn rewards on airfare, hotels and other expenses, no matter how you fly or where you stay. However, your options also include co-branded cards geared toward travelers loyal to particular airlines or hotel chains.
The small business owner
Business credit cards can benefit people who own or operate small businesses in a number of ways.
With a cash back card for business, you can earn a flat percentage on general purchases or a higher rate on specialty categories such as office supplies. A business travel card that earns miles or points can help you reduce your costs for airfare, hotel stays and transit.
Like travel cards, many business rewards cards also offer specialized features and benefits such as:
- Higher credit limits than consumer cards
- Tools to help you manage expenses
- Free additional cards for employees
The debt manager
Two types of credit card features specifically address debt and interest: balance transfers and introductory zero-interest offers on purchases.
A balance transfer involves moving debt from one type of credit account to a new one — in this case, a balance transfer credit card. The best balance transfer cards offer an introductory period of zero-interest that you can use to pay off the transferred debt while temporarily avoiding interest.
Cards with zero-interest offers on purchases also provide a temporary window of 0% APR, making them useful for large purchases that would be difficult to pay off in a single billing cycle. Once the intro period ends, however, the APR will change to the card’s regular variable range.
Used responsibly, the right cards can help you establish a credit history and improve your credit score — all while providing a convenient and secure method of payment for all kinds of expenses. Many issuers offer credit cards for people who have less than perfect credit scores or no credit history at all. Categories for credit-builders include:
You’ll find some overlap between the no-credit-history category and the student category, since many students lack a true credit history before getting their first card. A number of student cards don’t require a credit history or a good credit score to apply.
The categories of bad credit and secured cards also overlap to an extent. A secured card requires an upfront deposit, which will then serve as your credit limit. Deposits are refundable over time as long as you’ve established a good record of on-time payments. By providing the deposit, a consumer with bad credit is essentially putting up collateral so that the issuer faces less risk in issuing the secured card.
A young adult can get a head-start on life’s financial journey with a student credit card. The best student credit cards have features tailored to this specific type of consumer, including:
- Relaxed credit requirements. You might not need a good or excellent credit score (or even a credit history at all) to qualify.
- Features designed for you. To cite just one example, how about an annual statement credit that rewards you for maintaining a high GPA?
- Less emphasis on annual fees. For someone who doesn’t yet have a career or annual income, a card that doesn’t charge an annual fee makes a lot of sense.
Choosing a card by credit score
Your credit score helps determine your qualifications for credit cards and other types of loans. Although scores can vary by credit bureau, credit card issuers and online marketplaces commonly use recommended credit scores to help consumers get an idea of which cards they might qualify for.
For example, each credit card available through Bankrate.com has a recommended credit score, with the range of scores defined as:
A fifth category, No Credit History, covers credit cards for students and others who have little or no experience in using credit.
Check your score before you begin
Checking your credit score can be surprisingly easy, and it might not even cost you anything. Your options include:
- The three major U.S. credit bureaus — Experian, Equifax and TransUnion
- The Fair Isaac Corporation, creator of the FICO score
- Your bank or credit union
- Credit card issuers, through the FICO Score Open Access program
Knowing your score will give you a better idea of which cards are within your reach, credit-wise.
Focus on your goals as a user of credit
If you choose a card according to your credit score, it’s helpful to keep some objectives in mind.
- No credit history — To establish your credit profile
- Bad credit or fair credit — To improve your credit score
- Good credit or excellent credit — To take advantage of rewards programs and lower APRs as you responsibly maintain your credit score
Even if you already have good credit, achieving an excellent credit score is a worthwhile pursuit. The higher your credit score, the more likely you are to receive favorable terms on any kind of credit application — from cards to car loans to mortgages.
Choosing the best credit card offer
A credit card offer is an incentive to get a new card, or in some cases for current cardholders to stay loyal.
Many credit card offers involve a sign-up bonus for new cardholders, sometimes called a welcome offer. The typical sign-up bonus is an offer of cash back, rewards points or travel miles that you earn by spending a certain amount of money within the specified timeframe after opening the account, usually 3 months.
Other types of credit card offers include:
- Earning a bonus rewards rate during your first year as a cardholder
- Discounts or statement credits on purchases from specific merchants
- A waiver of the card’s annual fee for the first year
Although sign-up bonuses are exclusive to new cardholders, issuers sometimes add benefits that current cardholders are eligible for. When parts of the country began facing travel restrictions, several issuers updated their rewards programs to reflect the fact that many travelers had become homebodies.
Choosing a credit card by the best offer for you is similar to choosing a card by the type of consumer you are. You’ll need to determine whether the sign-up bonus, discounts or other incentives match up well with your spending habits and your goal for getting the card in the first place. For example, choosing a card with a juicy sign-up bonus for travel miles doesn’t make sense unless you’re a frequent traveler with a specific plan to use the bonus for a future trip.
A look at some of the best credit card offers currently available
Chase recently introduced a special, limited-time offer for new Chase Freedom Flex℠ and Chase Freedom Unlimited® cardholders. Both cards have a new cash back category — 5 percent on grocery store purchases (not including Target or Walmart purchases) on up to $12,000 in the first year. New cardholders are also eligible for a sign-up bonus of $200 after spending $500 in the first three months from account opening. The bonus was previously $150.
In the travel card category, Capital One is currently offering a sign-up bonus that differs from the all-or-nothing format typically used in welcome offers. New cardholders of the Capital One® Venture® Rewards Credit Card can earn 100,000 bonus miles by spending $20,000 on purchases in the first 12 months. Alternatively, they can earn a traditional version of a sign-up bonus: 50,000 miles for spending $3,000 on purchases in the first 3 months.
Elsewhere in travel cards, Chase has added grocery store purchases as a limited-time rewards category for new and existing Chase Sapphire Preferred® Card and Chase Sapphire Reserve® cardholders. The offer ends April 30, 2021.
Meanwhile, American Express has announced limited-time welcome offers on three of its cards.
Consumers who apply for the American Express® Gold Card or The Platinum Card® from American Express on Resy.com are eligible for new welcome offers. For the Gold card, the offer is 60,000 Membership Rewards points after spending $4,000 in the first 6 months. The welcome offer for the Platinum card is 75,000 Membership Rewards points after spending $5,000 in the first 6 months. New owners of the Platinum card also earn 10X Membership Rewards points at U.S. gas stations and U.S. supermarkets on the first $15,000 in combined spending during their first 6 months of Card Membership.
In addition, the Blue Cash Everyday® Card from American Express has a new welcome offer: $100 cash back after spending $1,000 in the first 6 months and 20 percent back on Amazon purchases in the first 6 months (up to $200 in earnings).
CardSmart: What is a recommended credit score?
Credit cards available through Bankrate.com and other websites typically have a range of credit scores suggested by the card issuer. On Bankrate, a Recommended Credit Score appears with each card review and on the “best of” category pages.
Keep in mind that your credit score alone doesn’t determine whether you’ll qualify for a particular card. Although the recommended credit score can give you a better idea of your chances for qualifying, every situation (like every applicant) is unique.
If you see a card you’re interested in, make sure that your credit score falls within the range listed in the card’s recommended credit score before applying. While you can’t know your exact odds of being approved for any credit card, your chances are obviously higher with a higher credit score.
A majority of U.S. consumers have good credit scores, with the typical FICO Score at 705 and the typical VantageScore at 680.
|What are the credit score ranges?
||How many consumers are in them?
|300 – 579 – Poor
|580 – 669 – Fair
|670 – 799 – Good
|800 – 850 – Excellent
Source: Experian 2019 Consumer Credit Review
Taking time to check that your score matches the card’s recommended score will help ensure that you have an easier time finding the right card for you.
Learn more with Bankrate
How do you apply for a credit card?
Although online applications are increasingly common, you might find yourself replying to an offer you receive in the mail or in person at your bank. Whether you apply with a pen or an internet browser, you’ll need to remember a few tips.
Check your credit score
Before you start filling out applications, or even shopping around, you should find out your current credit score.
Knowing your credit score will give you a better idea of:
- Which cards you’re most likely to qualify for. On Bankrate.com, for example, each card offered by our partners has a Recommended Credit Score that you can use as a guideline.
- The APR you might be offered. The higher your credit score, the more likely you are to get a lower APR.)
You can check your credit score through any the major credit bureaus, the Fair Isaac Corporation (FICO), or possibly through your bank.
Have your information ready
The obvious blanks you’ll need to fill include:
- Date of birth
- Social Security number
You should also be ready to provide additional information such as:
- Annual income
- Monthly rent or mortgage payments
- Current bank accounts
Look for pre-qualified offers
With a pre-qualified credit card offer, you can get an idea of your chances for approval without submitting an application that will trigger a hard credit inquiry.
This kind of offer has two benefits. One is the convenience of finding out how likely you are to be approved for the card, and the other is the lack of a hard credit check. Each hard credit check will temporarily knock your credit score down a few points. The pre-qualification process involves a soft credit check, so pre-qualified offers could help you avoid minor, short-term dings to your credit score as you shop for the right card.
One way to find and compare pre-qualified offers is by using tools like CardMatch™. The CardMatch feature is designed to show you the best credit card offers from our partners that you’re pre-qualified for. Results of your CardMatch search provide a summary of individual card offers and links to apply on the issuer’s secure website.
Your wait time could be minutes or days
The response time to your application will depend on several factors, including:
- With online applications, it could take as little as a few minutes or as long as several business days to find out (business days normally being Monday through Friday)
- If you apply by mail, the issuer’s mailed response could take a week or more
- The process will take longer if you incorrectly fill out your application form or the issuer needs more information
The worst-case scenario is 30 days. Federal regulations require that once your application is complete, the issuer has 30 days to notify you of approval or denial.
Frequently asked questions about credit cards
You don’t have to be a credit card expert to get the most out of your particular card, but it does help to understand some of the basics. Here are some essential questions about credit cards, and their answers.
What does a credit card actually do?
A credit card is a payment method that serves as a line of credit and lets you make purchases now while paying for them later. Unlike cash, you don’t pay upfront. Unlike checks or debit cards, you don’t pay with money that you’ve already deposited into an account.
Physically, credit cards are flat, thin pieces of plastic or metal that can be scanned by electronic readers. You can also use them for digital transactions by entering your account number and other identifying information into an online portal.
Credit cards are typically issued by banks and financial services companies. According to the American Bankers Association, the number of open credit card accounts in the United States has reached an estimated 370 million.
What is credit card APR and why does it matter?
Interest charges are calculated differently with credit cards than with other forms of credit, such as car loans or mortgages. If you carry an unpaid balance on your card past the payment due date, you’ll have to pay interest charges in the form of APR (annual percentage rate).
Each month, you have the opportunity to pay a minimum payment, your full balance or an amount in between. While most cards don’t require you to pay off your balance in full each month, it’s the only way to avoid paying interest. Bankrate recommends paying off your entire balance every month.
However, carrying a balance may be unavoidable in certain cases. If you expect to carry a balance, it’s worth looking at cards offering a 0% introductory APR. Just make sure that you’ll pay off the full balance by the end of the 0% APR period.
How do you qualify for a credit card?
The more creditworthy you are, the better your chances of meeting an issuer’s requirements. Issuers determine which credit cards you qualify for based on your creditworthiness — primarily your credit score. Top-tier credit cards generally require credit scores in the Good to Excellent range, measured by the FICO scoring model as 670-850.
Substantially improving your credit is a task months or years in the making. If your credit score falls short of the 670-850 FICO range, don’t wait to start building it up. Here are two steps you can take immediately:
- Pay your bills on time. It’s not just about avoiding late fees and interest charges. A good record of paying what you owe makes you look more responsible in the eyes of a lender.
- Keep your credit utilization on the low side. Think of credit utilization as the relationship between two numbers: the amount of credit you have available and how much of it you’re using. Try to keep the second number at 30 percent or less of the first, since good credit utilization shows lenders that you know how to avoid getting over-extended.
If you start improving a subpar credit score today, you could increase your chances of qualifying for a top credit card substantially.
Does applying for a credit card hurt your credit score?
A credit card application could have a negative (but temporary and relatively small) effect on your credit score. Getting approved for a credit card or other type of credit account requires some scrutiny of your track record as a borrower. The process can involve two types of credit checks:
- A “hard” inquiry, when the lender pulls your credit report to make a decision about whether to lend to you.
- A “soft” inquiry, when the lender checks your credit as part of a preliminary screening. Pre-qualified credit card offers involve soft credit inquiries, so keep an eye out cards that offer pre-qualification.
A hard inquiry can subtract a few points from your credit score temporarily, while a soft inquiry usually has no effect. You’ll want to limit the number of hard inquiries on your credit report, so be as selective as possible about which credit cards you apply for.
How many credit cards should you have?
The majority of consumers probably have a “go-to” card that they use for everyday purchases, and for most of them that single card might be enough. However, you might benefit from an additional card if you:
- Travel frequently. A general-purpose travel miles card or a co-branded hotel or airline card can partially offset the costs of airfare, lodging and other travel expenses.
- Own a small business. Business credit cards have targeted rewards programs, business-specific benefits and higher credit limits than consumer cards.
- Have the potential to earn cash back in specific categories. One example is a parent who could use a “designated supermarket card” that earns elevated cash back rates on grocery store purchases.
- Want a card upgrade. You might find a new card that’s a step up from your current go-to card. In that case, you could keep the old card active and use it for a small, recurring expense (auto-paying for cloud storage or a streaming subscription, for example).
The number of credit cards you should have depends entirely on your unique situation. Having multiple cards is fine as long as it conclusively delivers benefits that you can use (miles, cash back, perks and so on). Just beware of burdening yourself with annual fees and hurting your credit score with excessive applications.
How we score and review Bankrate’s top credit cards
Every card that we highlight has been rated on a scale of 1-5 stars. The most important factors in determining the score for our top picks include:
Affordable interest rates are essential to great credit card offers. If you ever need to carry over part of your balance (hopefully not all of it) from one month to another, a lower APR should lower the total cost.
The best programs for earning cash back, points or miles offer generous rewards rates and flexible redemption options. Some reward programs also include online shopping portals where you can find discounts on popular merchandise.
Introductory 0% APR offers
A zero-percent APR offer — essentially a temporary reprieve from interest — could make it much less expensive to pay off a big purchase or a balance transfer. The best offers last several months, a year or even longer before the regular APR applies.
A low cost of ownership is another key element of a great credit card. The total burden of fees should be low. If a card does charge an annual fee, it should also offer rewards and benefits that can help offset that cost.
Essential reading for credit card users
If you’re looking for more information on how credit cards can help you reach your financial goals, check out some of our top resource articles: