Your Guide to Choosing the Best Credit Card for January 2020
This article was last updated Dec 30, 2019. Terms and conditions may have changed. For the most accurate information, please consult the issuer website.
If you’re having trouble finding the best credit card, you’re not alone. There are thousands of credit cards available, all providing various perks that suit consumers in different situations. Depending on your needs and wants, the best credit card for you may be a no annual fee card, secured card, travel card, cashback card or one of the numerous other types.
In this guide, we’ll discuss four steps you can take to help narrow down your search for the best credit card.
- Check your credit score
- Understand your needs: Ask important questions
- Evaluate the cost
- Compare credit cards
1. Check your credit score
Most credit cards require a certain level of credit for you to qualify for a card. The higher your credit score, the more cards you’ll qualify for and the better terms you’ll receive. Before applying for a credit card, you should check your credit score so that you know where you stand.
You should also review your credit report several times a year. AnnualCreditReport.com is the only authorized source for your credit report, and you can receive a free credit report from each of the major credit bureaus — Experian, Equifax and TransUnion — once every 12 months. We recommend requesting one report every four months.
2. Understand your needs: Ask important questions
To choose a credit card that will benefit you the most, you should ask important questions that can help you find the right card. Below, we list questions that you should ask during your credit card search, organized by what situation you’re in.
If you are a student, new to credit, or have limited, bad or fair credit
- Can I build credit with this card? If you need a credit card for bad credit, or you need to improve your score, you should opt for a card that reports to the three major credit bureaus. This way, your credit activity will appear on your credit report. While credit cards from the major issuers all report to the bureaus, cards from smaller banks may not — or may only report to one.
- Is there an annual fee? Many credit cards come with annual fees. A fee may be worth it if the benefits outweigh the cost. Before you settle on a card with an annual fee, make sure you’ll receive good value and you compare it to no-fee cards.
If you’re in debt or need of special financing
- Is there an intro 0% APR period? If you plan on making several large purchases or completing a balance transfer, a card offering an intro 0% APR period is ideal. These cards can help you finance new purchases or provide you with the chance to get out of debt via an interest-free period.
- What are the balance transfer fees? Most balance transfer cards charge you a balance transfer fee that’s typically 3% to 5% of the total amount you transfer. This fee is often outweighed by the amount you save from obtaining a lower rate. But you should make sure it’s worthwhile. We have a helpful balance transfer calculator that can tell you how much you can save.
- How high is the ongoing APR? If you’re someone who carries a balance from month to month, it’s important to check the ongoing APR before you apply for a card. High APRs mean high interest charges. Look for cards with low APRs and a 0% APR introductory period.
If you want to earn rewards
- Does the card have a rewards program? A card offering a rewards program can save you money by allowing you to redeem rewards for gift cards, statement credits, travel and more. If a card has an annual fee, the rewards program may allow you to recoup your costs.
- How easy is it to earn rewards? If you’re looking for a simple rewards credit card, cards with rotating bonus categories, quarterly maximums or difficult redemption options may make it a hassle to earn rewards. Consider flat-rate cashback and rewards cards instead.
- Where do I spend most of my money? When looking for a rewards card, it’s important to choose a card with rewards tailored to your spending habits. For example, if you’re a frequent traveler, choose a card with travel rewards. It doesn’t make sense to open a rewards card that primarily rewards supermarket spending if you opt for dining at restaurants.
After asking the important questions mentioned above, you should have a good idea of your needs and wants. The next step is to evaluate the costs associated with a credit card.
3. Evaluate the cost
Credit cards come with a variety of fees, including annual, balance transfer, foreign transaction and more. Depending on the type of card for which you’re looking, those fees may not be worth it. Before you apply for a credit card with one or more of those fees, review the card offering to see if the cost is minor in comparison to the perks.
If you’re looking for a …
Card to build credit
Beware of numerous fees. Credit cards designed for building credit typically have more fees than specialty cards such as rewards or cashback cards. This can be attributed to the lower credit requirements. Some fees you may come across include:
-
- Annual fee
- High interest rate
- Account activation fee
- Monthly service charge
- Authorized user fee
Balance transfer card
Consider cards with no balance transfer fee. This can save you the typical 3% to 5% fee most balance transfer cards charge. For example, transferring a $2,500 balance to a card with a 5% balance transfer fee will cost you $125. With a no-fee balance transfer card, you wouldn’t incur that charge.
Rewards card
See if the perks offset the annual fee. Some of the rewards cards on our site have annual fees, but the benefits you receive as a cardholder may make up for it.
For example, the Chase Sapphire Reserve® has a $550 annual fee, but it comes with a $300-a-year reimbursement for travel purchases. That makes the effective annual fee much lower at $150. And that’s not considering the numerous other perks provided by the card.
Look for no foreign transaction fee cards. If you’re a frequent traveler and often travel outside the U.S., a card with no foreign transaction fee is essential. It’ll save you the typical 3% fee many other cards charge on purchases made abroad.
Once you’ve evaluated the cost of opening a credit card, you can compare cards to find the best one for you.
4. Compare credit cards
Credit cards can be broken down into three main categories: secured cards, intro 0% APR cards and rewards cards. Below, we list the different types of cards, their benefits and provide recommendations.
Secured cards
Some of the best cards to build or rebuild credit include secured cards. A secured card is just like a regular, unsecured card but requires a minimum security deposit to access a line of credit. Don’t worry about losing your deposit though — it’s refundable if you pay your balance in full and close your account, or if you’re transitioned to an unsecured card.
Here are some recommended cards:
Balance transfer or intro 0% APR cards
A balance transfer card or card offering an intro 0% APR for purchases can help you save a great deal of money if you’re debt-ridden or need to finance an upcoming purchase. During the intro 0% APR period, you won’t incur interest on your balance. Intro periods typically range between six and 21 months — providing you plenty of time to pay off your debt.
While most BT cards have balance transfer fees, there are no-fee BT cards that can save you more money than cards with BT fees.
Here are some recommended cards:
Rewards cards
A rewards or cashback card can provide you the opportunity to earn points per dollar spent on select purchases. There are cards offering rewards in various categories including gas, grocery, travel and airline, among others. These cards often also offer great perks that may include travel and purchase protections, travel credit, auto rental insurance and more.
Here are some recommended cards:
For more card recommendations, check out our roundup of the best credit cards.
