The Chase Freedom Flex℠, launched with a splash in late 2020. When paired with a premium Chase Ultimate Rewards®-earning card like the Chase Sapphire Preferred® Card, Chase Sapphire Reserve® or Ink Business Preferred® Credit Card, it can earn powerful Chase Ultimate Rewards points. Even as a standalone cash back card, it’s tough to beat considering it also has no annual fee.
Rewards: 5% cash back on up to $1,500 in categories that rotate quarterly (requires activation), 5% on travel purchased through Chase Ultimate Rewards®, 3% on dining and drugstores and 1% on all other purchases
Welcome Offer: $200 bonus after spending $500 on purchases in the first 3 months from account opening
Annual Fee: $0
Other Benefits and Drawbacks: The Chase Freedom Flex℠ packs a huge punch for a card without an annual fee. The biggest downside to this card? You’ll have to remember to activate the quarterly bonus categories and track how much you’ve spent because the rotating categories have a $1,500 cap—at least if you’re planning to optimize your spending.
You can also benefit from complementary cell phone insurance protection when you pay your monthly cell phone bill with your card. Claims are limited to $800 per claim and $1,000 per year total.
This card does charge a foreign transaction fee so it is not a good choice if you plan to travel abroad.
Read the Chase Freedom Flex℠ review to learn more.
In a crowded market of 2% cash back cards, the Wells Fargo Active Cash℠ Card stands out because of its introductory APR offer and Visa Signature benefits.
Rewards: 2% cash rewards on purchases
Intro APR Offer: 0% intro APR for 15 months from account opening on purchases and qualifying balance transfers, then a 14.99% to 24.99% variable APR applies. Balance transfers made within 120 days qualify for the intro rate and fee of 3%. Balance transfers made after that time are charged a fee of up to 5%, min: $5
Welcome Offer: $200 cash rewards bonus after spending $1,000 in purchases in the first 3 months
Annual Fee: $0
Other Benefits and Drawbacks: The Wells Fargo Active Cash℠ Card offers cell phone protection when you pay your cell phone bill with the card each month. It charges a foreign transaction fee so it is not a good choice for use abroad.
To learn more about the Wells Fargo Active Cash℠ Card, read our full review.
The Capital One Venture X Rewards Credit Card, launched in November 2021, was a big shake-up to the travel card market. It offers benefits similar to other premium travel rewards cards with a lower annual fee—making this card a great option for even the occasional traveler.
Rewards: 2 miles per dollar on all eligible purchases and 5 miles per dollar on flights and 10 miles per dollar on hotels and rental cars when booking via Capital One Travel
Welcome Offer: 100,000 bonus miles after spending $10,000 on purchases within the first six months of account opening. Plus, for a limited time, receive up to $200 back in statement credits for vacation rentals charged to the account within the first year
Annual Fee: $395
Other Benefits and Drawbacks: In addition to the ability to earn solid rewards, the Capital One Venture X Rewards Credit Card offers up to $300 back annually as statement credits for bookings through Capital One Travel and 10,000 bonus miles on each card anniversary.
Cardholders receive a Priority Pass lounge membership, access to Capital One lounges and a Global Entry or TSA PreCheck application fee credit after paying for the application fee with the card.
Read our full review of the Capital One Venture X Rewards Credit Card to learn more.
If you’re wanting to get into transferable points but the annual fees of the top-tier cards scare you away, the Chase Sapphire Preferred® Card may be a good place to start.
Rewards: 5 points per dollar on travel purchased through Chase Ultimate Rewards®, 3 points per dollar on dining and 2 points per dollar on all other travel purchases and one point per dollar on all other eligible purchases
Welcome Offer: 60,000 bonus points after spending $4,000 on purchases in the first 3 months from account opening
Annual Fee: $95
Other Benefits and Drawbacks: Chase Ultimate Rewards® are both flexible and valuable, which is why the Chase Sapphire Preferred® Card makes our list if you can’t justify the Chase Sapphire Reserve®’s higher annual fee. You have the ability to transfer Ultimate Rewards to a variety of airline frequent flyer programs and hotel chains, such as United Airlines and Hyatt.
An Ultimate Rewards point from your Chase Sapphire Preferred® Card is worth 1.25 cents per point when redeemed through the Chase travel portal or when using Pay Yourself Back, but if you are going to use the travel portal we would recommend considering the higher annual fee Chase Sapphire Reserve® instead because your points will be worth 1.5 cents each in the same instances. The Chase Sapphire Preferred® Card also offers best-in-class travel protections, though they’re not quite as good as the Chase Sapphire Reserve®’s coverage.
The Chase Ultimate Rewards cards are best taken as a family: partnering a Chase Sapphire Preferred® Card with a Chase Freedom Flex℠ and an eligible Chase Ink business card allows you to earn Ultimate Rewards quickly. Rewards can also be combined between family members to really speed up the pace.
Read our Chase Sapphire Preferred® Card review to learn more.
Many trips have non-refundable elements that are tied to specific dates such as hotel or prepaid tour reservations. If you are interrupted or have to cancel your trip, you could be out a tremendous amount of money.
In addition to offering the ability to earn valuable points on purchases, the Chase Sapphire Reserve® offers trip cancellation and interruption insurance for covered situations, trip delay insurance, lost baggage and baggage delay insurance, primary rental car insurance and more. All of these best-in-class protections helped this card top the list for the best travel rewards credit card.
Rewards: 5 points per dollar on air travel and 10 points per dollar on hotels and car rentals when purchasing travel through Chase Ultimate Rewards® immediately after the first $300 is spent on travel purchases annually. Earn 3 points per dollar on other travel and dining and 1 point per dollar spent on all other purchases
Welcome Offer: 50,000 bonus points after spending $4,000 on purchases in the first 3 months from account opening
Annual Fee: $550
Other Benefits and Drawbacks: The high annual fee of this premium rewards card comes with $300 in travel credits that are applied automatically when you make qualifying purchases.
The Chase Sapphire Reserve® benefits include Priority Pass airport lounge membership that includes airport restaurant locations, which the American Express versions of Priority Pass do not include. This means that when you fly, you’ll be able to eat and drink at Priority Pass restaurants in addition to the over 1,200 airport lounge locations worldwide as long as you enroll, which could save your family a nice chunk of change.
Chase Ultimate Rewards points are transferable to a large number of travel partners including United Airline MileagePlus and World of Hyatt. Points are redeemable on Chase’s travel portal or using the Pay Yourself Back feature where they’re worth 1.5 cents each.
Read the Forbes Advisor Chase Sapphire Reserve® review to learn more.
If you’re after a luxury travel experience, especially if you want access to a variety of airport lounges, The Platinum Card® from American Express (Terms apply, See rates and fees) is a good choice. It’s packed full of other benefits and perks, too.
Rewards: 5 membership rewards points per dollar for flights booked directly with airlines or with American Express Travel on up to $500,000 per calendar year, 5 points per dollar on prepaid hotels booked with American Express Travel and 1 point per dollar on all other eligible purchases
Welcome Offer: 100,000 membership rewards points after spending $6,000 on purchases on the card in the first 6 months of card membership
Annual Fee: $695
Other Benefits and Drawbacks: The The Platinum Card® from American Express is packed full of additional benefits. For starters, you’ll benefit from access to a number of different airline lounges: Amex Centurion Lounges, over 1,200 Priority Pass airport lounges (excluding restaurant locations, enrollment required), and Delta SkyClubs when flying Delta same-day.
Cardholders will also receive up to $200 in airline incidental credits with the eligible airline they select each year (enrollment required), valid for purchases such as seat selection and checked bags. Additionally, cardholders will receive a credit to cover the TSA PreCheck or Global Entry application fee and annual CLEAR membership, plus up to $200 annually in Uber credits ($15 per month plus a $20 bonus in December when your eligible card is linked to your Uber account, good for U.S. Uber Eats and rides). The Platinum Card also offers Gold status with both Hilton Honors and Marriott Bonvoy with enrollment.
In 2021, the Platinum Card added additional lifestyle benefits to the card with enrollment including up to $300 in annual Equinox credits in $25-per-month statement credits, up to a $300 bike credit when you purchase a SoulCycle at-home bike, monthly Walmart+ membership fee credit and up to $240 (doled out monthly in $20 increments) in digital entertainment credit for subscriptions to eligible services which include Audible and the New York Times.
Read our The Platinum Card® from American Express review to learn more.
If you’re a regular United flyer, especially if you value having access to United Club lounges, the United Club℠ Infinite Card could be your go-to. Even if you value none of the card’s other benefits, this card is a smart way to gain access to United Club lounges.
Rewards: 4 miles per dollar on United® purchases, 2 miles per dollar on all other travel, on dining including eligible delivery services and 1 mile per dollar on all other purchases
Welcome Offer: 80,000 bonus miles after spending $5,000 on purchases in the first 3 months from account opening
Annual Fee: $525
Other Benefits and Drawbacks: The show-stopping benefit on the Chase United Club Infinite Card is a full United Club lounge membership. This lounge membership also includes access to Star Alliance lounges when you are flying a Star Alliance member airline same-day. You can bring in up to two guests. Getting access to a United Club lounge membership through this credit card is less expensive than buying just a lounge membership directly.
Additionally, you’ll benefit from Premier Access which includes priority check-in and boarding, your first and second checked bags for free when flying United, a TSA PreCheck or Global Entry application fee credit.
This card also comes with travel and purchase protections including trip delay and cancellation insurance, lost and damaged baggage insurance, delayed baggage insurance, primary rental car insurance coverage, purchase protection, extended warranty and more.
Read the full United Club℠ Infinite Card review to learn more.
Another newcomer to the market in 2021, the Aeroplan® Credit Card offers a good way to earn miles if you’re willing to get a bit outside of your comfort zone and learn about a program not based in the U.S.
Rewards: 3 points per dollar spent on dining, takeout and eligible delivery services, grocery stores and each dollar spent directly with Air Canada including vacations and cruises and 1 point per dollar for all other eligible purchases
Welcome Offer: 2 flight reward certificates valid for up to 50,000 points each after spending $4,000 on the card in the first three months from account opening
Annual Fee: $95
Other Benefits and Drawbacks: The Aeroplan® Credit Card also offers up to a $100 statement credit to reimburse your Global Entry, TSA PreCheck or NEXUS application fee every four years.
Cardholders will get their first and second checked bag for free for themselves and up to eight companions when traveling on Air Canada. The card does not charge foreign transaction fees and offers insurance for trip delay, trip cancellation and interruption, baggage delay, lost and damaged baggage, and an auto rental collision damage waiver.
While this card does offer good mileage earning and solid additional benefits, potential cardholders should be prepared to spend some extra time learning about Air Canada Aeroplan before applying.
To learn more about the Aeroplan® Credit Card, read our review.
The Hilton Honors Aspire Card from American Express* offers top-tier Diamond elite status in the Hilton program which offers upgrades, breakfast at participating hotels, late checkout and other benefits.
Rewards: 14 Hilton Honors bonus points at participating hotels or resorts within the Hilton Portfolio, 7 points per dollar on eligible purchases for flights booked directly with airlines or American Express Travel, car rentals booked directly from select car rental companies and U.S. restaurants and 3 points per dollar on all other eligible purchases
Welcome Offer: 150,000 Hilton Honors bonus points after spending $4,000 in purchases within the first 3 months of opening an account
Annual Fee: $450
Other Benefits and Drawbacks: The hefty annual fee can easily be worth it for those who make use of the $250 Hilton resort credit and the $250 airline incidental credit for an eligible airline you choose each year. Cardholders will also receive a free weekend night certificate each year when they renew the card.
The Aspire confers automatic top-tier status, which makes it worth holding for that reason alone if you stay at Hilton hotels often but not enough to earn status.
You’ll also receive a Priority Pass Select membership with access to over 1,200 airport lounges worldwide after you enroll in the program, however, your membership will not include access to Priority Pass restaurant locations.
This card also has some travel and purchase protections including baggage insurance for lost, damaged or stolen baggage and return protection.
Read the Hilton Honors Aspire Card from American Express* review to learn more.
The Discover it® Student Cash Back offers a unique combination of strong earning rates and a welcome bonus not typically seen in student cards. If leveraged properly, cardholders can earn some serious cash back.
Rewards: 5% cash back on everyday purchases at different places each quarter like Amazon.com, grocery stores, restaurants, gas stations and when you pay using PayPal, up to the quarterly maximum when you activate. Plus, automatically earn unlimited 1% cash back on all other purchases
Welcome Offer: Earn an Unlimited cashback match – Discover will automatically match all the cash back earned at the end of the first year. There’s no minimum spending or maximum rewards
Annual Fee: $0
Other Benefits and Drawbacks: Discover is not as widely accepted as Mastercard, Visa or even American Express if you plan to use it overseas. This is a drawback for students who travel or study abroad. The quarterly bonus categories may or may not fit how you spend, meaning you might not maximize your earning potential every single quarter and you need to remember to activate the bonus each quarter.
Read our full Discover it® Student Cash Back review to learn more.
If you have a balance on another credit card and would like the chance to pay it down with an introductory APR, the Bank of America® Customized Cash Rewards credit card is a logical choice.
Rewards: 3% cash back in the eligible category of your choice, 2% at grocery stores and wholesale clubs (up to $2,500 in combined choice category/grocery store/wholesale club quarterly purchases) and unlimited 1% on all other purchases
Intro APR Offer: 0% introductory APR for 15 billing cycles for purchases, and for any balance transfers made in the first 60 days. After the intro APR offer ends, a 13.99% – 23.99% variable APR will apply. A 3% fee (min $10) applies to all balance transfers
Welcome Offer: $200 online cash rewards bonus after you make at least $1,000 in purchases in the first 90 days of account opening
Annual Fee: $0
Other Benefits and Drawbacks: Bank of America Preferred Rewards clients can earn a 25% to 75% bonus on all rewards earned. This card charges a foreign transaction fee so it is not a good choice for use abroad.
Read our Bank of America® Customized Cash Rewards credit card review to learn more.
The Wells Fargo Reflect℠ Card has no annual fee and new cardholders get a best-in-class introductory period to pay down balances. Just remember that you only have 120 days to make the transfer before a higher balance transfer fee kicks in.
Annual Fee: $0
Balance Transfer Offer: Get a 0% intro APR for 18 months from account opening on purchases and qualifying balance transfers. An extension of up to 3 months of additional introductory APR will apply with on-time minimum payments during the introductory and extension periods. After that, a variable APR of 12.99%-24.99% applies. An introductory balance transfer fee of either $5 or 3% of the amount of each balance transfer, whichever is greater, for 120 days from account opening applies. After that, up to 5% for each balance transfer, with a minimum of $5.
Balance Transfer Fee: The fee for a balance transfer is up to 5%; min: $5.
Other Benefits and Drawbacks: To get the absolute longest balance transfer window, make sure not to make a late payment. If you do you may lose the three month extension offered for good payment behavior. The card also comes with up to $600 in cell phone protection when you pay your monthly bill with the card (subject to a $25 deductible) and access to roadside dispatch.
Read our full review of the Wells Fargo Reflect℠ Card.
The Amazon Prime Rewards Visa Signature Card* has always been a good card. The recent increase in our reliance on Amazon for daily needs makes it a great one. If you’re spending most of your shopping budget with Amazon or other companies in the Amazon ecosystem, you might as well get rewarded for it.
Rewards: 5% cash back in rewards at Amazon.com and Whole Foods Market with an eligible Prime membership, 2% cash back at restaurants, gas stations and drugstores and 1% on all other purchases
Welcome Offer: Amazon.com gift card instantly on card approval
Annual Fee: $0 with Prime membership
Other Benefits and Drawbacks: If you’re not a regular Amazon or Whole Foods shopper, this card probably doesn’t make sense for you. The $119 cost of Prime membership effectively acts as an annual fee. If you’re already spending it, then the card has no additional cost to carry.
You can redeem rewards as an Amazon credit with no minimum. However, you can also redeem your cash back as a statement credit or direct deposit to a checking or savings account once your rewards balance reaches $20 or more.
The Amazon Prime Rewards Visa Signature Card has a number of benefits making it great for travel including no foreign transaction fees, travel accident insurance and baggage delay insurance. It also has perks like Visa Signature’s Luxury Hotel Collection and Concierge Service.
Read our Amazon Prime Rewards Visa Signature Card* review to learn more.
If you have a large grocery bill, the Blue Cash Preferred® Card from American Express (terms apply, see rates and fees) is the most rewarding card out there—as long as you don’t go over the spending cap. The card is also rewarding for carpoolers and road trippers, offering elevated cash back at gas stations.
Rewards: 6% cash back at U.S. supermarkets on up to $6,000 per year in purchases (then 1%), 6% cash back on select U.S. streaming subscriptions, 3% cash back at U.S. gas stations and on transit (including taxis/rideshare, parking, tolls, trains, buses and more) and 1% cash back on other eligible purchases. Cash back is received in the form of Reward Dollars that can be redeemed as a statement credit
Welcome Offer: $300 statement credit after making $3,000 in purchases within the first 6 months
Annual Fee: $0 introductory annual fee for the first year, then $95.
Other Benefits and Drawbacks: In addition to amped-up earnings on groceries, you get access to Amex Offers. The offer savings could add up quickly as long as you remember to activate and use them. The card also offers return protection and car rental loss and damage insurance.
Read our Blue Cash Preferred® Card from American Express review to learn more.
Those who regularly dine out can easily up their rewards by picking up the no-annual-fee U.S. Bank Altitude® Go Visa Signature® Card. You’ll also earn elevated rewards on groceries so basically anyone who likes to eat will benefit from the Altitude Go.
Rewards: 4 points per dollar on takeout, food delivery and dining, 2 points per dollar at grocery stores, grocery delivery, gas stations and on streaming services and 1 point per dollar on all other eligible purchases
Welcome Offer: 20,000 bonus points after spending $1,000 in eligible purchases within the first 90 days of account opening
Annual Fee: $0
Other Benefits and Drawbacks: The U.S. Bank Altitude Go card also offers 0% intro APR on purchases and balance transfers for the first 12 billing cycles, followed by a regular variable APR of 14.99% – 23.99%. Cardholders also receive a $15 annual streaming credit and are not charged foreign transaction fees.
Read our U.S. Bank Altitude® Go Visa Signature® Card review to learn more.
Those who have bad credit but can still qualify for an unsecured card should consider the Petal® 1 “No Annual Fee” Visa® Credit Card, issued by WebBank, Member FDIC. When you apply, more than just a credit profile may be used when determining who qualifies for a card, potentially allowing more people to be approved for Petal than with other cards.
Rewards: 2%-10% cashback at select merchants
Welcome Offer: This card does not offer a welcome bonus
Annual Fee: $0
Other Benefits and Drawbacks: The Petal 1 card does not charge foreign transaction fees and cardholders have access to secondary auto rental collision damage waiver when renting cars.
To learn more about the Petal® 1 “No Annual Fee” Visa® Credit Card, read our full review.
If you’re new to credit or have made credit mistakes in the past, you may need a secured card to help build or rebuild your credit. In exchange for a security deposit, Discover will provide you with an equal credit line if you are approved. Most secured credit cards do this, but the Discover it® Secured Credit Card adds rewards to the mix.
Rewards: 2% cash back at gas stations and restaurants on up to $1,000 in combined purchases each quarter. Plus, earn unlimited 1% cash back on all other purchases
Welcome Offer: Unlimited Cashback Match – Discover will automatically match all the cash back earned at the end of the first year
Annual Fee: $0
Other Benefits and Drawbacks: The Discover it® Secured Credit Card is one of only a few secured cards that earn cash back on purchases, so it’s a great option to build credit and earn rewards. You can have a maximum of a $2,500 credit limit by putting down a $2,500 deposit. Discover will review your account for graduation to an unsecured card and the refund of your security deposit starting at seven months.
Like any good secured card, the Discover it® Secured Credit Card reports to all three major credit bureaus.
Read our Discover it® Secured Credit Card review to learn more.
Survey: Most Americans Prefer Travel Rewards Over Cash Back
A survey by Forbes Advisor found that over 75% of Americans prefer to earn some kind of travel reward as a rebate on their credit card spending—with those preferring to earn hotel rewards leading the way at 28%.
While the vast majority of credit cardholders prefer to earn rewards, only 29% of cardholders responded that they strongly understand their card benefits. With many travel rewards cards packing in additional benefits—especially premium rewards cards—it’s important to understand the ancillary card benefits offered to help make the cost of the annual fee worth it. Some cards feature hundreds to thousands of dollars of built-in benefits, but these benefits don’t matter if they’re not used.
More worrying, 75% of survey respondents reported missing or making a late payment to their credit card during the pandemic. Payment history makes up 35% of a FICO credit score, so even one late or missed payment can have a lasting negative impact. Late payments can also trigger a penalty APR. Ninety percent of respondents say they carry a balance occasionally or more often, and credit cards average a 16.44% interest rate. The interest charges from carrying a balance will quickly outweigh the value of rewards earned, and that’s even worse for those who are hit with a penalty APR from a late payment.
Credit cards are a tool that when used wisely can help make travel more affordable or allow experiences that would otherwise not be achievable. Those who are carrying a balance on their travel rewards cards should look to pay down debt first so the value of rewards earned can truly be realized.
A Beginner’s Guide to Credit Cards
How do credit cards work?
A credit card can be used to make a purchase of goods or services in-person or online. When you apply for and are approved for a credit card, you’re given a line of credit based on your credit score and other factors like your income.
A potential advantage to using a credit card over paying cash or a debit card is that a credit card can function like a short-term loan. By using a credit card, you’ll normally have until the end of the credit card billing period (also known as a “grace period”) to pay back from your bank account what you charged to the card. You can also earn rewards like cash back or travel rewards with some types of cards, along with extras like purchase and travel protections. The downside is that if you don’t pay the entire amount that you charged to your card, you’ll accrue interest on your purchases which can be expensive over time.
How do credit card rewards work?
When you make a purchase on a rewards credit card, you’ll earn a percentage back on your spending as either cash back, points or miles depending on the type of card and what type of rewards it’s offering. Airline credit cards, for example, will typically earn miles, cash back cards will earn you cash back and general purpose rewards cards may earn points that can be used for things like a statement credit or to redeem for travel, merchandise or other options.
Some rewards credit cards will earn the same flat rate back on all spending, like a card that earns 2% back on every purchase. Others will have tiered rewards where a certain type of purchase, like gas or groceries, may earn at a higher reward rate then other types of purchases. Before choosing a rewards card it’s important to consider your spending habits and the type of rewards you think you’ll get the most benefit from and then compare that to the various options available to you.
How does credit card interest work?
Most credit cards calculate interest using the average daily balance method, which means your interest is compounded and accumulates every day, based on your daily rate of interest. In other words, every day your finance charges are based on the balance from the day before.
The daily rate of interest is determined by dividing your card’s APR by 365 to find the daily rate of interest and then multiplying that number by your balance. For example, to determine the average daily balance on a card with a $10,000 balance on the first day of the billing cycle and an APR of 17%, you’d divide 17 by 365, which equals a daily rate of 0.0466%. This means the next day, your card would have a balance of $10,004.66, which is what you get when you multiply the balance of $10,000 by 0.000466.
Since the average daily balance is compounded, every day the calculation is based on the day before.
APR vs. APY vs. Interest
APR is a card’s annual percentage rate over the course of a year. A balance of $10,000 with an APR of 17% would accumulate $1,700 in interest. But since most credit cards use an average daily balance method to calculate interest, it can be an incomplete view to look at a card’s APR and try to estimate how much you’d pay in interest.
APY is not a term typically applied to credit cards as it refers to the amount of interest you’d earn over the course of a year on things like deposit accounts such as savings accounts and certificates of deposit (CDs).
In other words, APR refers to the amount of interest you’d pay on a credit card balance or other line of credit and APY refers to the amount of interest you can earn on a deposit account.
Credit Card Application
In general, there are several steps to applying for a credit card: First, check your credit score through a credit card issuer or by ordering it from one of the three main credit agencies. Once you know where you stand with your credit score, decide which type of card will be the best for you based on what you’re planning to use it for. Credit cards typically fall into one of three categories: rewards, low APR or credit-building.
Next, check to see if you’re pre-qualified. Many issuers, including American Express, Bank of America, Capital One, Chase, Citibank, Deserve and Discover will let you check to see if you’re pre-qualified for any of their cards. Keep in mind that pre-qualification doesn’t ensure approval.
Choosing the right card may be difficult, but applying for the card you’ve chosen is easy. Most cards can be applied for online, although you can go to the issuing bank and apply in person or call them on the phone. If you’re approved, the next step is to make sure you understand the card’s terms and conditions, listed in the fine print of the cardmember agreement.
How to Improve Your Credit Score
There are several steps you can take to try to improve your credit score. First, check your credit report to make sure there aren’t any errors that could be having an adverse effect. Paying your bills on time, every time will have the single biggest impact on your score. After payment history, the next biggest factor in your credit score is the amount of debt you have. Since credit reporting agencies don’t have your income information, they use something called “credit utilization” instead of a debt-to-income ratio.
Credit utilization is the amount of debt you owe relative to the amount of credit you have. So if you have a balance of $3,000 on a card with a $10,000 limit, you’re using 30% of your credit. Total credit utilization is based on the aggregate amount across all your lines of credit, both what you owe and how much you have available. It’s typically suggested that utilization of 30% or below should be the goal.
Credit Cards for Good Credit
What is considered a good credit score can vary among lenders, and you typically aren’t told what a particular lender’s exact cutoff point is between a good credit score and a bad one. However FICO, the most widely known credit scoring model, shares some helpful information you can use as a guide. The most common FICO scores feature a scale of 300 to 850. On that scale, a credit score between 670 and 739 is generally considered “good.”
You can check out Forbes Advisor’s list of best cards for good credit to see what might work for your particular circumstances.
Credit Cards for Fair Credit
The definition of a fair credit score varies among lenders, and you typically aren’t told what a particular lender’s exact cutoff point is between a good credit score and a fair one. However FICO, the most widely known credit scoring model, shares some helpful information you can use as a guide. The most common FICO scores feature a scale of 300 to 850. On that scale, a credit score between 580 and 669 is generally considered fair.
You can check out Forbes Advisor’s list of best cards for fair credit to see what might be a fit for your particular circumstances
Credit Cards for Bad Credit
While there’s no exact number that counts as the threshold between “bad” and “good” credit, generally a FICO score below 580 is considered very poor and between 580 and 669 is generally considered fair.
The lower your credit score, the more limited your options when it comes to credit cards. Someone with bad credit will typically only be able to get approved for a secured card or a card with higher-than-average interest rates and other additional fees. See Forbes Advisor’s list of best credit cards for bad credit to see what some of the options are if your credit isn’t stellar.
What are the three credit bureaus?
There are three credit reporting agencies in the U.S.:
Each of these agencies may use a slightly different method of reporting your credit behavior so it’s not uncommon to have a slightly different credit score with each agency. All three companies serve the same function: to analyze your credit behavior to generate a three-digit credit score used to determine your creditworthiness and in turn, the rates you’ll be offered on loans like a credit card or a mortgage.
Types of Credit Cards
Although all credit cards can be used to make purchases, there are several different types of credit cards, each designed for a different goal.
Rewards Credit Cards
A rewards credit card is one that earns a percentage back on your spending, in the form of cash back, points or miles. The exact amount you’ll earn back can vary greatly by card with some earning the same flat rate back on all of your spending and others offering tiered rewards with certain purchase categories earning elevated rates over other categories.
Balance Transfer Credit Cards
A balance transfer card is one that offers a low or 0% APR for transfers made to the card for an introductory period of time. After that introductory period, the card’s standard variable APR will typically apply. There may be a balance transfer fee to shift debt to a balance transfer card, usually 3% to 5% of the amount being transferred.
Low Interest Credit Cards
A low interest credit card is one that has a low ongoing interest rate, typically far lower than the industry average APR on other cards. For those who typically carry a balance on their cards, this may be a more beneficial option since over time, the interest charges will be less than on a card with a higher interest rate. This is different from a card with a 0% APR in that a low interest card’s rate is ongoing and doesn’t expire after a promotional period.
0% APR Credit Cards
A 0% APR credit card is one that offers an introductory 0% interest period on either purchases, balance transfers or both. Think of a 0% APR offer like an interest-free loan with an expiration date. If used responsibly, it can give you a cushion of time to pay off what you owe, without accumulating additional finance charges. But also be aware that the zero-interest period of time doesn’t last forever and when it expires your balance will accrue interest at the card’s standard variable rate.
Student Credit Cards
College student credit cards aren’t actually different from other credit cards, they’re just marketed towards college students or others with thin credit files who may otherwise have a challenging time being approved for a credit card.
A student credit card, which is a first credit card for many, will typically have more forgiving underwriting standards than a card designed for those with good credit. This means you’re likely to qualify with a lower credit score than the standard version of the card would require. Some college credit cards even offer some perks like rewards and cash bonuses for good grades.
Credit Cards to Build Credit
When you’re just starting out with credit or you’re seeking to move past credit missteps, there are credit cards aimed at helping you prove responsible payment behavior, and in turn boost your credit profile. The best starter credit card for you will provide a balance between benefits, such as reporting to the credit bureaus and helping to raise your credit score, and costs to carry, including annual fees or any other maintenance costs.
Business Credit Cards
A business credit card can be a great way to separate your personal expenses from your work ones, even if it’s just a part-time gig. When you apply for a business credit card, your approval will be based on your personal credit score. It also means you’ll be personally liable for any debts accrued on the card even if they’re from your business and that business fails. The issuer will also take other factors into consideration when reviewing your application, including your business income and credit history.
How to Choose the Best Credit Card
Choosing the right credit card for your particular circumstances should be based on a combination of factors including your credit score, your tolerance for annual fees, what perks you might be seeking and how any rewards fit with your spending habits.
Not all credit cards charge an annual fee but many of those that do will offer rich rewards and other perks in return.
Depending on your goals in acquiring a new credit card, be aware of any other fees associated with owning a particular card. For example, if you’re looking for a card to shift a balance to, be sure to factor in any balance transfer fees. Those with not-so-great credit may find that some options available to them charge account opening fees or credit limit request fees in addition to any annual fees. Steer clear of those, if possible.
For those who think they might carry a balance, even if it’s just occasionally, be aware of the APR on any card you’re considering. Carrying a balance for any length of time on a credit card is expensive and you don’t want to be socked with a ballooning balance over time.
If a card offers rewards on your spending, make sure that the areas where it offers the best rewards are a match for your spending habits. Someone without a car is unlikely to benefit from high rewards on gas, for example. While those who rarely dine out or get take-out will likely fare better with a card that offers elevated rewards on groceries rather than dining.
Many credit cards offer perks and benefits beyond the ability to earn rewards. Premium travel cards may offer exclusive airport lounge access, free checked baggage and airline incidental credits. Many cards on the market offer other perks like extended warranty protections and other travel protections and insurances. Even cards without an annual fee may offer several money-saving benefits.
Cards aimed at helping you shore up your credit profile, like secured cards, work by reporting your on-time payment behavior to the credit bureaus so that over time, your score can improve with a record of positive payment history. There are many cards on the market aimed at those seeking to boost their profile. The best ones charge little to no annual fee and don’t carry account opening or other unnecessary fees. There are some unsecured cards available too, although these tend to be unavailable to those with a recent bankruptcy.
How to Get The Most Out of Your Credit Card
Credit cards provide everything from consumer protections to valuable benefits and substantial earnings potential, but only when used correctly. Here’s how to get the most value out of your cards.
Find a Rewards Structure That Meets Your Needs
Earning any type of rewards is better than nothing, but to get the most out of your credit card, you’ll want to ensure you’re earning the most rewards you can on the types of purchases you make most often. Balancing this with a type of rewards you value and are easy to redeem–cash back, miles or points–is also important.
Use the Included Benefits on Your Card
Most credit cards come with additional benefits, such as purchase protection, extended warranties, store credits and discounts or travel perks. Whenever you get a new card, or come up on your card’s renewal anniversary, familiarize yourself with its current benefits to make sure you know what benefits you’re entitled to or which ones you may need to enroll for.
Make Card Payments as Required
Credit cards are a convenience but if you’re not making payments toward your balance due, you’re likely racking up hefty fees. Be sure to make minimum payments on time every month to avoid late fees. Ideally, pay off your full balance to avoid interest charges as well. Not only will you save on fees, but you’ll keep your credit in good standing for future card and loan approvals at advantageous rates.
Which Credit Card Should I Get?
Different types of credit card users will benefit most from different types of credit cards. Here are some tips to help you decide what’s best for you.
Value Shoppers will likely benefit most from cash back cards that provide rewards on everyday purchases. These cardholders will want to minimize annual fees and aren’t concerned about travel rewards or high end perks. Check out the best cards for shopping and best cards for groceries to learn more.
The best credit card for travelers will vary based on the kind of traveler you are. If you like to play license plate ABC, check out our best cards for road trips. If you prefer your travels at 35,000 feet, check out the best airline credit cards.
When you’re just starting out it can feel like a Catch-22. You need good credit to get a credit card, but you need a credit card to build good credit. Fortunately there are some cards out there that are good for both those starting out and those needing to get back on track. Check our best first credit cards and best cards for rebuilding credit lists to learn more.
College students have a plethora of credit card options because the banks understand the value of a lifetime customer. Many of these cards act as little siblings to their rewards card brothers, giving students a chance to earn rewards without needing as much of a credit history. Check out these best credit cards for students.
Whether it’s a roadside stand or a shop on Etsy, small businesses have unique credit needs. Business credit cards offer benefits tailored to commerce and offer a way to keep personal and business expenses separate. If you are just starting out, one of our best cards for new businesses may do the trick. If you operate an established business, even if it’s a side hustle, check out our best business credit cards list to learn about your options.
If you only stay at Hyatt or only shop at Pottery Barn, it may make sense for you to pick up a co-branded credit card for that store, airline or hotel chain. By doing so you’ll earn points and perks within their ecosystem, which you can then use to further your love of the brand.
Credit Card Companies
Credit Card Issuer
A credit card issuer is the bank that issues, or approves you for, the card you’re applying for. Some credit cards have the issuing bank as part of their name, like Chase or Citibank. Others work behind the scenes as the issuing bank for credit cards that may not be part of a traditional financial institution, like Chime or Upgrade.
Credit Card Networks
Card networks process the payments between the buyer and the merchant. There are four major credit card networks: Mastercard, Visa, American Express and Discover. American Express and Discover are unique in that they are also card issuing companies in addition to owning a card network.
Co-branded Credit Cards
A credit card that’s co-branded is one that’s issued in partnership with a certain retailer or service provider. Popular brands like JetBlue, Hyatt and Disney have all partnered with credit card companies to offer cards that earn rewards in their loyalty programs and offer brand specific perks. Typically a co-branded credit card will offer rewards and or other perks within the brand.
Visa vs. Mastercard
Both Visa and Mastercard are payment processing networks and it shouldn’t matter to you as a consumer which one your card is on when it comes to making a payment. But both cards offer perks and benefits specific to their brand and type of card within the brand. For example, a traditional Visa or Visa Platinum card may offer roadside dispatch services and lost card replacement assistance. A Visa Signature card may offer these benefits plus travel insurances and protections. Each individual Visa card will come with different benefits based on the type of Visa and the perks selected by the issuing bank to include.
The same holds true for Mastercard: There are different types of Mastercards with varying perks and benefits depending on the type of Mastercard. The most notable feature some Mastercards offer that some Visas don’t is cell phone coverage. You shouldn’t choose a card based on the issuing network however. Instead think of any extras offered by the payment networks as a bonus, with the focus on the main features of the card itself.