When people find out I write about credit cards (and make videos about credit cards), they always ask, “What’s the best credit card?” And I always say (of course), “That depends.” There is no “best” credit card that fits every single person. However, there is a way to help you figure out which credit card will be best for you.
Who are you?
First you need to discover who you are as a credit card user. Specifically, how do you answer these questions:
- How is your credit history?
- Do you carry a balance on your credit cards?
- How much do you spend with your credit cards?
- What rewards fit your preferences and your lifestyle?
These questions are almost like a decision tree. Going from top to bottom in that list, the way you answer each question will tell you either what type of card to get or whether you should move on to the other questions. Let’s take them one by one and you’ll see what I mean.
How’s your credit history?
Are you just starting out with credit? Or do you have several years of credit history? Is that credit history good or bad?
Yep, more questions. Let’s sort them out.
If you’re in college: First, if you have no credit history and are in college, I would recommend that you get a college student credit card issued by a major bank such as one of the Bank of America student cards. However, this is not a license to build debt, so don’t go hog wild. It’s just the first step in building a credit history, and you’re smart to start in college if possible, because getting your first credit card can actually be more difficult once you’re out of school.
If you’re not in college and have either no credit history or a bad credit history, I’d strongly suggest a secured credit card. Secured credit cards require a security deposit in order to get the card, but they are a good way to build credit without a ton of extra fees. Choose a secured credit card from a major bank — see our best secured credit cards list — because many times the secured card will lead to an unsecured card. That means the credit card company could either return your deposit and let you keep using the card or they’ll upgrade you to a different, better card — assuming you’ve been paying your bills on time. Either way, you’ll get that security deposit back eventually as long as you’ve paid your balance off.
You can also choose to go after an unsecured credit card, but it gets much iffier in terms of whether you’ll be approved and how much you might pay in fees and/or interest.
So… if you have bad credit or are new to credit, you’re done here. Stop reading and go find the right card for you.
If you have a good credit history, proceed to the next question…
Do you carry a balance on your credit cards?
If you have a history with credit cards, do you tend to carry a balance on your cards and pay interest or do you always pay off your balance in full?
If you carry balances, and especially if you have large balances already, your best bet is to get the lowest interest credit card you can find and do not bother with rewards credit cards. Credit cards with rewards have interest rates generally about 2 percentage points higher than cards without rewards, so getting a rewards card when you have to pay interest doesn’t make sense — you’ll pay more in interest than you’ll get in rewards. Shop around a little, because cards with good rates can be hard to find. Compare your local bank’s card with those of the major issuers.
OK, if you carry balances, that’s it for you. Get that low interest card and stop reading.
However, if you always pay your balances in full each month, it’s time to think about rewards. Proceed to the next question(s)…
How much do you spend? + What rewards appeal to you?
The type of rewards credit card you choose may depend on how much you actually charge to your credit cards each month.
If you put less than $1000 per month on your credit cards, your best bet is almost always going to be a cash back credit card. Other reward cards may be tempting — everyone likes to earn free travel, for example — but you are unlikely to spend enough to meet the thresholds required to get free airline tickets or pricey merchandise. Instead of collecting miles or points for years in hopes of a single redemption, get a cash back credit card that allows you to earn on every purchase and lets you redeem even very small rebates. These days some cash back credit cards will let you redeem for any amount at all, while some will require you to earn $25, and a very few will have higher thresholds.
Our favorite cash back credit cards are the Citi Double Cash Card and PayPal Cashback Mastercard. Both allow you to earn a 2% rebate on all of your card purchases. Very simple. If you want to work a little harder to maximize your rebates, you can look at cards that offer higher cash back percentages in certain spending categories. The Capital One SavorOne Cash Rewards Credit Card is a great example, a no-annual-fee credit card that gives you 3% cash back on dining and entertainment, grocery store purchases, and more. The Chase Freedom Flex Credit Card and DISCOVER IT® CASH BACK CREDIT CARD both have specific purchasing categories that earn you 5% rebates. Note, however, that those 5% categories change each calendar quarter.
If you spend over $1000 per month on your credit cards (and you always pay off your balances in full), that’s when we would advise you to consider travel rewards cards — if they fit your spending patterns and give you rewards you want. No need to feel like you should go for travel, though — even big card spenders often prefer going with the best cash back credit cards for the generous rebates and easy redemptions.
However, if travel is appealing to you, there are generally two routes to choose between:
- If you already travel on a regular basis and find yourself using the same airlines and/or hotel chains repeatedly, it makes good sense to get a credit card from that airline or hotel chain. This allows you to piggyback on the loyalty miles or points that you are already receiving, which means you can redeem rewards more often and get greater perks through their “elite status” programs such as airport lounges, free checked bags, etc. Pretty much every major airline and hotel chain offers at least one credit card that lets you earn miles/points on your card spending — and many have more than one card based on your reward goals and how much you’re willing to pay in annual fees. (Yes, annual fees. Most good travel reward cards have them. But if you spend a lot with your cards, you will often find that the annual fee is more than made up for in terms of rewards and perks that you receive. But — do the math based on your own spending.)
- If you don’t travel on a regular basis (but would like to travel more for pleasure) and you charge over $1000 per month to your cards, that’s when it makes sense to consider general travel cards like the Chase Sapphire Preferred or Chase Sapphire Reserve or the The Platinum Card® from American Express or American Express® Gold Card. These cards give you reward points that are more flexible in terms of using them for certain travel purchases or transferring them into frequent flyer programs as needed. They also offer perks such as airport lounge access, travel reimbursements, and more. These cards can come with modest annual fees or very high annual fees of $400+, so be sure you do some calculations of how much you believe the rewards are worth to you before jumping in.
You Can Mix and Match
If you’re excited to maximize credit card rewards, you should carry multiple credit cards and pull out the best card for each purchasing situation. If you spend a lot with your cards, you can earn quite a bit more in rebates and rewards by going this route. However, if you don’t charge significant amounts to your cards each month, this could mean a lot of extra thought for very little extra reward.