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With thousands of credit cards on the market, trying to pick the right one for you can be a challenge. But if you have specific goals or features in mind, and with a little help from the experts, it's a lot easier to narrow down your choices.
Choosing the right credit card for you generally depends on a few considerations: your credit score, your spending habits and what you want out of it. Before you choose one, plan to check your credit score, take a look at your budget and consider which features are important to you.
Ask Yourself What Kind of Card You Need
There are several types of credit cards from which you can choose. Regardless of which card you have in mind, make sure you meet its credit requirements and that its features work well with your existing lifestyle.
If you're planning to get a rewards credit card, for instance, it's a good idea to pick one that will give you the most points, miles or cash back based on how you spend your money. With so many types of credit cards available, it's important to narrow your search by knowing which features you're looking for.
The types of credit cards available include:
- Low interest credit cards
- Balance transfer credit cards
- Cash back credit cards
- Travel credit cards
- Secured credit cards
- Student credit cards
- Unsecured credit cards for bad or limited credit
- Store credit cards
- Small business credit cards
Here's what you need to know about each card type before you make your pick.
Low Interest Credit Cards
Low interest credit cards generally can be categorized into two groups: cards that offer a low ongoing annual percentage rate (APR) and cards that offer an introductory 0% APR promotion.
True low interest credit cards aren't very common. If you're looking for one that has an APR in the low teens or even single digits, your best bet is to check with your local credit unions. Just keep in mind that these cards typically don't offer much in the way of other perks. Also, if you're planning to pay off your balance in full each month, it may not matter if your APR is low.
However, these cards can still be a good fit if you're just looking for one to use in case of an emergency and don't have enough cash on hand to cover your expenses.
Credit cards with a 0% promotional APR are more common, and you may be able to get one from a credit union or a bank. These cards charge no interest on purchases for a set period—typically between six and 18 months. This promotion gives you time to make a large purchase or several purchases and pay them off over time interest-free.
As long as you pay the balance in full by the end of the promotional period, you won't pay any interest. However, if you have a remaining balance or make purchases and don't pay them off the same month after the promotional period is over, your leftover balance will be assessed interest based on the card's standard APR.
Unlike credit cards with a low ongoing interest rate, many credit cards with 0% APR intro offers also provide rewards, welcome offers and other valuable benefits.
For example, the Chase Freedom Unlimited® offers an intro $150 cash bonus after you spend $500 in the first 3 months, unlimited 1.5% cash back on all your purchases, and an intro 0% APR on purchases and balance transfers for 15 months. After the intro period ends, you'll be charged a standard APR of 16.49% to 25.24% (variable) depending on your creditworthiness.
Balance Transfer Credit Cards
Balance transfer credit cards are similar to low interest credit cards, and many cards even fit into both categories. These cards allow you to move debt from another credit card via a balance transfer and pay it off with an intro 0% APR for six to 21 months, depending on the card.
This arrangement isn't always completely free, though. Many balance transfer credit cards charge an upfront fee—this balance transfer fee typically ranges from 3% to 5% of the transfer amount—to process the transaction.
But depending on how much debt you have and how much you stand to gain in interest savings, it could be well worth it to pay the fee.
The Citi Simplicity® Card - No Late Fees Ever, from our partner Citi, is a good example of a solid balance transfer credit card. It offers an intro 0% APR on balance transfers for 21 months (transfers must be made during the first four months) and purchases for 12 months. Once the intro period ends, the ongoing APR will be 16.24% to 26.24% (variable) depending on your creditworthiness. The card doesn't charge any late fees, though making a payment late could potentially cause you to lose your promotional APR.
The card's primary drawback is that it doesn't offer rewards. Also, there's a balance transfer fee of $5 or 5% of the transfer amount, whichever is greater. Some balance transfer cards offer rewards, and others don't charge a balance transfer fee, so keep those features in mind while you're shopping around.
Rewards Credit Cards
The primary purpose of a rewards credit card is to give you cash back, points or miles on every purchase you make. Many rewards cards also offer an intro cash bonus after you meet certain spending requirements. Here's how rewards credit cards are typically broken down:
Cash back credit cards: These cards offer cash back rewards, which are generally more flexible than points and miles—after all, you can use cash for just about anything.
Cash back credit cards typically have one of three rewards structures:
- Flat-rate rewards: With this setup, you earn the same rewards rate on every purchase you make. For example, the Citi® Double Cash Card offers 2% cash back—1% back when you make a purchase and another 1% back as you pay it off.
- Tiered rewards: These cards offer different rewards rates on different spending categories. For instance, the Blue Cash Everyday® Card from American Express offers 3% back at U.S. supermarkets (up to $6,000 spent per year, then 1%), 2% back at U.S. gas stations and select U.S. department stores, and 1% back on all other eligible purchases.
- Rotating rewards: These cards function similarly to tiered rewards cards. The difference is that these cards rotate their bonus rewards every few months, so around the holidays you may get a higher rewards rate for shopping at department stores, for instance. Examples include the Chase Freedom® and the Discover it® Cash Back.
Many cash back credit cards don't charge annual fees, though there are some exceptions. That said, they also typically offer lower intro bonuses (again, with some exceptions) than you'd get with a travel rewards credit card. It's not uncommon to find a cash back credit card with some kind of intro 0% APR promotion attached, whether for purchases or balance transfers.
Travel credit cards: Depending on which travel card you choose, you'll earn either points or miles. In general, though, there's not much difference between the two: They're simply terms for rewards currency.
Travel credit cards offer rewards you can use to get free travel. Depending on the card, you may also get extra travel-related benefits, such as access to airport lounges. There are three main types of travel credit cards:
- General travel credit cards: These cards give you points or miles that you can typically use to cover just about any travel expense. You can usually redeem your rewards to directly book travel, get a statement credit for a travel-related purchase, or transfer them to various airline and hotel loyalty programs. One card that allows you to do all three is the Capital One® Venture® Rewards Credit Card.
- Airline credit cards: These cards are co-branded with a specific airline. In addition to offering points and miles with that airline's frequent flyer program, they also typically give you airline-specific perks, such as free checked bags, priority boarding, in-flight discounts and more. The Delta SkyMiles® Gold American Express Card offers all this and more.
- Hotel credit cards: Like airline credit cards, these are co-branded with a particular hotel chain and will give you points and perks with that brand. That may include a free night's stay, elite status and more. The Hilton Honors American Express Surpass® Card has an intro offer, tiered rewards, automatic gold elite status and a free weekend night when you spend $15,000 in a calendar year.
Travel rewards credit cards offer either flat-rate rewards or tiered rewards. If you're considering one, pick one based on your travel habits and how flexible you want your rewards to be. For example, general travel rewards cards typically provide more flexibility but usually don't offer perks with a specific airline or hotel brand.
Credit Cards for Building Credit
If you're brand new to credit, have a limited credit history or are hoping to rebuild your credit score, the cards above are likely out of reach.
Here are the three types of cards to consider instead to build up your credit:
- Secured credit cards: These credit cards work almost exactly like traditional credit cards but have one distinction: Secured credit cards require that you put up a security deposit—often equal to your desired credit limit—to get approved.
That means that if you're willing to put down $200, you can typically get just a $200 credit limit. One card that bucks this trend is the Capital One® Secured Mastercard®. Depending on your creditworthiness, you can get an initial $200 credit line with a $49, $99 or $200 deposit. What's more, you can get a credit line increase after you make your first five monthly payments on time.
- Student credit cards: If you're a college student, you may be able to qualify for a student credit card instead of a secured card. These cards don't require a security deposit and often come with perks that can help you establish good credit habits.
For example, the Journey® Student Rewards from Capital One® offers 25% more cash back on your purchases (for a total of 1.25%) if you pay your bill on time every month. Also, you'll get access to a higher credit line after you make your first five monthly payments on time.
- Unsecured credit cards for bad or limited credit: If you're not a student and want to avoid paying a security deposit, there are other unsecured options available. It's important to keep an eye on fees and APRs while you're comparing cards. Some unsecured cards for bad credit charge outlandish fees, such as a processing fee to open your account and a monthly service charge in addition to an annual fee.
One card to consider if you have bad credit is the Indigo® Platinum Mastercard®. And if you have no credit history to speak of, the Petal Cash Back Visa® Card may be a no-brainer thanks to its easy qualification requirements, rewards and lack of annual fee.
Store Credit Cards
Store credit cards are offered by many retailers and often will net you rewards or perks when you shop at the store that issued it. You may even get a one-time discount when you apply for the card or get approved.
One type of store credit card, a closed-loop card, only can be used at the store it's branded with. But another type, an open-loop card, can be used to make purchases elsewhere, but shopping at its branded retailer will nab you additional benefits.
Many store credit cards don't require good credit to get approved. But typically they charge higher interest rates and have lower credit limits than traditional rewards credit cards.
In most cases, it's best to get a regular rewards card. However, if you regularly shop at a certain retailer and won't be tempted to overspend with all the perks you get from the card, it may be worth it.
Small Business Credit Cards
If you own a small business, you may want to choose a business credit card over a consumer card.
Business credit cards often provide higher credit limits than consumer credit cards and offer business-specific rewards categories and other benefits. You can find business credit cards with cash back or travel rewards, intro 0% APRs on purchases and balance transfers, and even credit-building features.
If you're considering a business credit card, make sure you do your research and choose one based on your company's typical expenses and the features it needs most.
Always Keep Your Credit Score in Mind
Before you apply for any credit card, it's essential that you take a moment to check your credit score. The last thing you want is to apply for a credit card you don't qualify for and get an unnecessary hard inquiry on your credit reports. Hard inquiries typically have a temporary negative effect on your credit scores.
If you compare cards using Experian CreditMatch™, you can view the cards you have a good chance of being approved for based on your credit scores. Once you know which cards are within reach, it'll be easier to pick the right one based on your other criteria.