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?
Don’t feel overwhelmed. 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 should I get a credit card?’
You might find the answer in a concept that keeps inching closer to reality: the cashless society. Credit cards play a big role in this trend, which is evident in the number of chip readers, online payment portals and digital wallet interfaces most of us encounter every day.
Bankrate.com recently surveyed credit card users to find out how they often used their cards on purchases that could earn rewards. One of the findings was that owners of rewards 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:
- Security features that reduce your vulnerability to fraudulent charges
- Rewards programs that earn cash back, travel discounts and more
- 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.
How to choose a credit card that’s right for you
There’s no such thing as a one-size-fits-all credit card. Although you have an abundance of cards to choose from, the sheer number of options can make it difficult to know exactly which one represents the best credit card for you.
Whether it’s your first-ever card or you’re an experienced cardholder looking to add a new one to your wallet, asking the right questions is crucial to your decision-making process.
Before you start your search for the ideal credit card, you should focus on a few key factors that can help you separate the great options from the good options.
Understanding credit card APR
A credit card is essentially a revolving loan, and most any loan is subject to some form of interest. If you carry a balance on your card, the issuer charges APR (Annual Percentage Rate) to account for interest as well as other fees.
Average credit card interest rate
3-month trend as of March 18, 2020:
An APR that’s close to or below the average would be ideal. Keep in mind, though, that your credit score and the type of card you’re shopping for will determine your results.
Of course, you can prevent APR from becoming an issue if you pay your entire credit card statement every month. 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.
The rewards programs should fit you
Credit card rewards programs cater to different spending habits and lifestyles. Knowing your financial goals and spending habits can help you figure out which rewards program will deliver the most value.
- Are you a frequent traveler interested in earning miles and points to help you offset the cost of airfare, hotels and other expenses? A travel rewards card should probably be at the top of your list.
- Do you want to earn cash back on everyday purchases? A flat-rate or bonus category cash back card might be more to your liking.
- Do you want flexibility in choosing how you redeem your rewards? Many rewards programs offer choices including statement credits, gift cards, travel miles and more.
If your card earns cash back, points or miles for particular kinds of purchases, using the card for those transactions as much as possible will help you maximize your earnings. 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.
Weigh the benefits of an 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.
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 that cost. If you don’t plan on using your card that often each month, you’ll be better off with a card that doesn’t charge an annual fee.
Fortunately, it might be easier than you think to find a no annual fee credit card that offers lucrative rewards and useful perks.
Estimate the value of 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.
It’s not always easy to put an exact dollar figure on benefits and perks. You might be able to get a reasonable idea by estimating what you would have to pay to get them without the credit card.
How generous is the sign-up/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 to a lower credit score. Also, some credit card issuers have tightened up their rules on applications to discourage the practice.
Do you want a card to manage debt?
If you’re looking to reduce and/or consolidate 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.
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.)
If you don’t know your credit score, you can check it for free by signing up with Bankrate.
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
Your wait time will vary
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 minutes 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.
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.
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% 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 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: