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To choose the right credit card, consider why you want it, how you plan to use it and which credit card issuers are likely to approve your application. Whether you have an upcoming large purchase, want to rebuild your credit, need a credit card that you'll only use during emergencies or want to earn rewards on everyday purchases, the right card can help you accomplish your goals. Here's how you can go about narrowing down your options.
Know Where Your Credit Stands
Before you start to apply for credit cards, you may want to review your credit report and know your credit scores. Many credit card issuers will check your credit during the application process, and base an approval or denial on the results. If you're approved, your credit can also impact your card's interest rate and credit limit.
If you have excellent credit and a good income, you may have your pick of the litter. But if you need to work on your credit and have a high debt-to-income ratio, you'll have fewer options.
You can check your Experian credit report and review your FICO® Score☉ with a free Experian CreditWorksSM account. You'll also get a personalized breakdown of which factors are impacting your credit score, and a tracker you can use to see how your score has changed over time.
While credit card issuers don't necessarily have a specific credit score requirement, many cards are designed for people in specific credit tiers. For example, luxury credit cards generally offer lots of rewards and benefits, but also require good credit or better. Starter credit cards may have fewer perks, but it's easier to qualify for one with bad credit.
If you're looking for personalized credit card offers, Experian CreditMatchTM takes your credit into account and matches you with credit cards that you'll likely be able to get.
How to Pick a Credit Card to Build or Improve Credit
There are a few options if you're brand new to credit, or if you have poor credit and want to use a credit card to help rebuild your credit.
If you have poor credit, you'll likely be best off with a secured credit card. Secured credit cards are credit cards that work the same as unsecured credit cards. The only difference is you'll put down a refundable security deposit when you open an account.
The card issuer holds on to your deposit and will generally give you a credit limit equal to the deposit amount. Having the money set aside reduces the issuer's risk of losing money if a cardholder doesn't repay their credit card bill, which is why issuers are open to giving secured cards to applicants with poor credit histories.
When you're looking for a secured card, try to get a card that:
- Has a low annual fee or none at all.
- Has a grace period.
- Reports to all three major credit bureaus: Experian, TransUnion and Equifax.
Here are some of our top picks for people who have bad or poor credit.
A secured card could also be a good option if you're brand new to credit. Additionally, you could consider a credit card from an issuer that doesn't require a credit check.
Instead of using your credit history, the issuer could link your bank account and review your transaction history. It can then approve or deny your application based on your cash flow—your income and spending.
Some of these cards offer rewards, helpful benefits and don't have annual fees. Here are a few of our top picks.
Choosing a Credit Card to Earn Rewards
If you have good to excellent credit and want a card for everyday purchases, a rewards credit card could be a great option. These cards tend to have a high interest rate, and some have high annual fees. But if you pay your balance in full each month and know how to use your rewards effectively, you could get hundreds or thousands of dollars in benefits each year.
First, decide which type of rewards program you want to use:
- Cash back: With a cash back credit card you'll earn cash back rewards each time you make a purchase. Cash back rewards are easy to calculate and use, which many cardholders find appealing.
- Card issuer: Some credit card issuers have rewards programs where you earn points or miles each time you make a purchase. You'll then be able to decide how to redeem your rewards, and your options may include cash back, gift cards, travel or transfers to other loyalty programs. Programs like this through card issuers can be a little trickier to navigate than cash back rewards as the value of your rewards can vary depending on the program and redemption options.
- Co-branded cards: Using a co-branded credit card, you can earn points in a company's loyalty program. There are co-branded airline, hotel and retail store cards, each with its own benefits and drawbacks. If you tend to use the same airlines or hotels, or frequently shop at the same stores, a co-branded card could be a good option.
Credit cards also tend to offer rewards using three systems:
- Flat rate: You'll earn the same rewards on all your purchases. Flat rate rewards don't require any extra thought and could be the best option if you tend to use your card for everything and shop at a wide variety of stores.
- Tiered: With tiered rewards, your rewards rate will be different depending on where you shop. For example, you might get 2 points per dollar on dining and travel purchases and 1 point per dollar on everything else. Tiered cards can be especially rewarding if you tend to spend a lot of money within one or two categories, or as a complement to a flat rate or rotating rewards card.
- Rotating: A few cards give you bonus rewards on purchases at certain types of retailers, and the list changes every three months. With some cards, for example, you'll earn 5% (or 5 points) per dollar on purchases within the bonus category on the first $1,500 you spend during the quarter—and 1% on everything else. The 5% rate is high, but the downside is the issuer gets to pick the categories and they might not align with your usual spending, and the base (non-bonus) rewards rate is usually low. With these programs, you need to remember to activate the bonus each quarter to earn the higher rewards.
Between the three types of rewards programs and three types of earning structures, there's a lot to consider when choosing a rewards credit card. Fortunately, you can quickly narrow down your list of potential fits.
For example, if you want to earn cash back and get extra rewards when you're buying groceries, consider a tiered rewards card and search online for the best cash back credit cards for groceries. You'll quickly find lists of the top picks, with the cards' terms and pros and cons listed for you to review.
Choosing a Credit Card to Finance a Purchase
Credit cards charge interest, so it's best to pay your bill in full each month to avoid accruing interest. Thanks to promotional offers for new cardholders, however, it can be wise to make a large purchase using a credit card with an introductory 0% annual percentage rate (APR) offer and pay it off over several months.
The best 0% APR cards will give you a promotional period of around 12 to 21 months from the time you open the account. Interest won't accrue on your purchases during this time, and if you pay off your balance by the end of the promotional period, you won't wind up paying any interest. Coupled with smart budgeting, a good 0% APR intro offer could save you lots of money over a loan.
On the other hand, if you currently have credit card debt that's accruing interest, look into balance transfer credit cards. These cards offer similar 0% APR introductory offers, but the 0% rate applies to balances that you transfer to the card rather than purchases. You may need to pay a fee based on the amount of debt you transfer, but some of the best balance transfer cards don't charge the fee to new cardholders.
With either type of card, read the terms of the card and offer carefully. For example, if a card's 0% APR offer only applies purchases, your balance transfers will still accrue interest. Or, if you have only a 0% APR balance transfer offer, your purchases could accrue interest. Also, make sure you have a plan to pay off the balance before the introductory period ends and the standard interest rate kicks in.
Try a Matchmaking Service
Finding the right credit card depends on your goals, how you want to use the card and your creditworthiness. You'll need to start with personal reflection to set your goals. Once you're ready to apply, you can use a service such as Experian CreditMatchTM to get personalized credit card offers based on your credit history. You can then filter these offers to narrow in on the best card for you right now.