Find the credit card you’ve been looking for
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?
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.
Our experts evaluate top cards in all the major categories — including rewards, cash back, travel and business — and narrow down the list to a select few.
A complete guide to choosing and using credit cards
Why credit cards are an important financial tool
Ready or not, America continues moving closer to a cashless society. Credit cards play a big role in the trend, as anyone who regularly encounters chip readers, online payment portals and mobile wallet interfaces can see.
In many cases, using credit is more convenient and secure than paying in cash or writing a check. Also, many credit cards have built-in incentives such as:
- Rewards programs that earn cash back, travel discounts and more
- Special offers that provide a temporary reprieve from interest charges
- Features that help you build or repair your credit
- Sign-up bonuses and welcome offers worth hundreds of dollars
Taking all these factors into consideration, it’s easy to see why credit cards are the preferred method of payment for an estimated 29% of Americans.
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. Bankrate has the personal finance resources and network of credit card partners to help you do both.
What makes a great credit card offer?
Here are the main features you should look at to determine which cards will provide the best value, usefulness and convenience.
APR (Annual Percentage Rate)
APR represents the interest that a credit card issuer charges you if you carry a balance. Typically, issuers have a variable APR range. The rate you qualify for will depend on your creditworthiness and other factors.
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 fees on your purchase.
Bankrate estimates the three-month trend for variable credit card interest rates at 17.34% as of December 23, 2019.
Annual fee
Some credit cards require cardholders to pay an annual fee as the cost for holding the card. Typically, the higher the annual fee, the more value the card offers in regard to rewards, bonuses, perks and other benefits.
Annual fees vary by card and issuer. The typical range for annual fees can go anywhere from $50 to $500, but $99 fees are fairly common.
However, a number of high-quality cards don’t charge an annual fee. It might be easier than you think to find a no annual fee credit card that offers lucrative rewards and useful perks.
Rewards programs
Credit card rewards programs cater to different spending habits and lifestyles, and how the card’s rewards system is set up is a large factor in determining which card is right for you. The method for earning rewards usually involves a percentage of the money spent. Examples include:
- Flat-rate — A card that earns 1% cash back for every dollar spent on any eligible purchase
- Tiered rates — A card that offers a higher rewards percentage for specific types of purchases, such as groceries, gas or travel expenses
- Rotating bonus categories — A card that earns a higher rate on different kinds of purchases that change during the calendar year, usually quarterly (every three months)
Perks and benefits
Each credit card on the market offers a set of perks for cardholders. A top-tier travel card might offer benefits such as:
- Airport lounge access
- Trip insurance
- Travel credits
- TSA PreCheck or Global Entry application fee credits
Cash back credit cards might be more likely to offer access to presale tickets, retail discounts and special deals available through the issuer’s online shopping mall.
Sign-up bonus/welcome offer
One incentive issuers often use to get you to apply for a credit card is offering a sign-up bonus, sometimes called a welcome offer.
After spending a certain amount within a set period of time (typically within the first 3 months after you open an account), cardholders receive a one-time bonus in the form of points, miles, statement credits or cash back.
Although sign-up bonuses can be lucrative, signing up for multiple credit cards only to cancel after you’ve earned the bonus is problematic. So-called churning can lead a lowered credit score. Also, some credit card issuers have tightened up their rules on applications to discourage the practice.
Balance transfer and 0% intro APR
If you’re looking to reduce debt, a balance transfer credit card can help you save hundreds or even thousands of dollars on interest payments. You can transfer debt from an existing credit account, usually a credit card but sometimes other types of debt, to a balance transfer card and begin paying it off at a lower interest rate. Many balance transfer cards offer a temporary period when you’ll pay no interest, called a 0% intro APR offer.
In some cases, a card may offer 0% intro APR for purchases, balance transfers or both. If you need to make a big purchase, such as a home appliance, you could use a 0% intro offer to pay it off gradually during the introductory period without interest charges. Once the intro period ends, however, the APR will change to the card’s regular variable range.
Questions and answers 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 is a credit card, anyway?
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 be subject to interest charges in the form of APR (Annual Percentage Rate). The costs of APR can be considerable, which is why 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.
If you already have a balance on your current card, consider a balance transfer card with 0% intro APR. That introductory period offers an opportunity to reduce your debt while temporarily avoiding high interest charges.
How do you apply for a credit card?
Although online applications are increasingly common, you could reply to an offer you receive in the mail or in person at your bank.
Whether you apply with a pen or an internet browser, the credit card issuer will ask for certain information. The obvious blanks you’ll need to fill include name, date of birth, address and Social Security Number. You should also be ready to provide additional information such as:
- Annual income
- Monthly rent or mortgage payments
- Current bank accounts
The response time to your application will depend on several factors, including your credit status and whether you’ve applied online or offline.
With online applications, it could take as little as a few seconds or as long as several days to find out. If you apply by mail, the issuer’s mailed response could take a week or more.
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% or less of the first, since good credit utilization shows lenders that you know how to avoid getting over-extended.
An August 2019 survey by Bankrate found that credit cards are the financial product most frequently denied based on credit score. 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 has 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 to choose the right credit card for you
There’s no such thing as a one-size-fits-all credit card. The good news is that you have an abundance of cards to choose from, whether you’re looking to boost your credit score, earn cash back rewards or save up points and miles to fund your next vacation.
Rewards continues to be the top credit card feature that consumers look at when choosing a credit card, according to research by credit card service company Total System Services (TSYS).
Rewards as top credit card feature:
- 79%
- 2018
- 68%
- 2017
- 59%
- 2016
- 55%
- 2015
TSYS 2018 Consumer Payment Study
With so many different credit card rewards options, it can be hard to know exactly which one makes the best credit card for you. Here are a few questions to ask yourself as you’re comparing top offers.
Why are you looking for a credit card?
Are you looking to earn cash back rewards on everyday purchases? Are you a frequent traveler who wants to use rewards to fund your next vacation? Are you searching for a way to earn rewards on expenses for your small business? Do you need to build up your credit profile, plan for a large upcoming purchase or consolidate debt?
The best credit card for you will greatly depend on your answer to these questions. If you know you rarely travel, then a travel rewards card won’t be a good fit for your needs. If one of your 2020 goals is to use points and miles to fund your trip to Europe, on the other hand, then a cash back card probably won’t give you as much value as top-tier travel cards.
Cash back is consistently the most preferred credit card rewards type. Credit card issuers are beginning to take notice as well, offering more attractive cash back offers.
Preferred types of rewards:
- 49%
- Cash back
- 29%
- Gas/Retail
- 20%
- Airline/Hotel
- 19%
- General Travel
- 18%
- Business
CreditCards.com July 2019 Favorite Cards Survey
What are your monthly spending habits?
Many cards offer bonus categories to help cardholders maximize earnings on certain kinds of expenses. These differ from card to card within each category. For example:
Knowing your spending habits can help you determine which card you can get the most value out of using. If the majority of your budget is spent on dining and entertainment, the Capital One Savor should be at the top of your list. However, if you don’t have a particular spending category that takes up a significant amount of your budget, a flat-rate cash back card like the Capital One® Quicksilver® Cash Rewards Credit Card (1.5% cash back on all eligible purchases, with no categories) might be more up your alley.
Are you willing to pay an annual fee?
Many of the top-tier rewards cards charge annual fees. While the perks typically outweigh the cost, those who don’t have room in their budgets to take on premium annual fees should consider no-fee options.
If the card charges a $95 annual fee, you’ll need to spend an average of $400 each month (earning 2x points or 2% cash back on average) to offset the cost of the annual fee. If you don’t plan on using your card that often each month, you’ll be better off with a card boasting no annual fee. Some of Bankrate’s highest-rated cards offer innovative rewards structures and an array of perks without the annual fee.
Pay attention to your card’s rewards program
If your card rewards particular kinds of purchases, try to use the card for those transactions as much as possible. For example, consider using your credit card to pay your water bill instead of a check or bank draft if the card offers cash back on utility payments. If it rewards you for grocery purchases, reach for your credit card at the supermarket checkout rather than your debit card.
Also, keep track of the rewards you’ve earned. Rewards that expire represent a missed opportunity to maximize your card. Unfortunately, a Bankrate survey has found that thousands of consumers who take part in rewards and travel loyalty programs let a portion of their rewards expire.
Keep track of your rewards by reviewing your monthly statement. You can probably find a special section covering rewards in your online customer portal, or “dashboard.”
How we score and review Bankrate’s top credit cards
The most important factors in determining the score for our top picks include:
- Rewards programs
- APR
- Introductory 0% APR offers
- Balance transfer options
- Credit-building potential
- Fees
Every card that we highlight has been rated on a scale of 1-5 stars. You can find more information about each card by clicking on the card names to read our in-depth credit card reviews.
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:
