This post references products from one or more of our partners. We may receive compensation when you apply through Experian's CreditMatch™ marketplace. All information, including rates and fees, are accurate as of the date of publication.
When applying for a credit card, Americans are faced with choosing from thousands of different products from hundreds of banks and credit unions. We're incredibly fortunate to have so many options, but the overwhelming number can certainly make it difficult to choose the best card for your needs.
How to Choose a Credit Card
Like other consumer products, credit cards are designed for specific types of users, including those with strong credit histories, poor credit, and everything in between.. First, you should only consider cards that are designed for applicants with your credit profile, so that your application is likely to be approved. For example, those with poor or average credit will have a much narrower selection of cards than those with good or excellent credit. But if you do have a strong credit history, you will want to leverage it by applying for cards with the most competitive terms. Find cards based on your credit status and needs here.
Next, you will need to prioritize the features and benefits that best fits the way you will use your card. For instance, those who carry a balance will want a card with the lowest possible interest rate, while others may seek rewards instead. In addition, there are specialized cards available for students, small business owners, and frequent travelers.
Finally, you can choose between two types of card issuers. The most common card issuers are banks, which can range from small companies in your community to large, nationwide corporations. You can also apply for a credit card from a credit union, which is a non-profit cooperative financial institution. Credit unions can also vary in size, but unlike banks, you must first join the credit union before apply.
Reward Cards Versus Non-Reward Cards
Many credit cards offer rewards for your spending in the form of points, miles or cash back. While it can be appealing to earn rewards from your credit card, it's not for everyone. Since reward cards will have higher interest rates than non-reward cards, you should avoid earning rewards if you carry a balance and pay interest on your cards. Non-reward cards are also simpler products that can offer lower fees, yet often feature fewer cardholder benefits. But for those who avoid interest charges by paying their balance in full, using a rewards card effectively reduce the cost of your purchases.
The Types of Reward Cards
There are a vast array of reward credit cards designed to fill every use imaginable. Many reward cards are affiliated with retailers and travel providers, and earn rewards in their loyalty programs. One of the most popular types of reward cards are those that offer points or miles in an airline's frequent flyer program. There are also many cards that offer points in a hotel loyalty program.
Another type of affiliate reward card are those offered by retailers. Many large stores offer their customers credit card applications at the cash register. Some of these cards are just charge cards that can only be used for in-store purchases, while others are credit cards that are affiliated with larger payment networks.
In addition to affiliate cards, there are plenty of banks and credit unions that offer reward cards that aren't connected to a merchant. These cards can offer cash back rewards, or different types of travel rewards. For example, many credit cards now offer reward points or miles that can be redeemed for statement credits towards travel expenses. These cards, such as the Barclaycard Arrival Plus, Capital One Venture and Discover it® Miles allow you to book your travel the way you normally would, and then redeem your miles for a statement credit to cover the cost.
Other travel reward cards offer points that can be redeemed directly for travel reservations, or transferred to points or miles with airline or hotel programs. Reward programs like this include Chase Ultimate Rewards, American Express Membership Rewards, and the Citi ThankYou rewards program In the hands of a skilled award travel enthusiast, these flexible reward points can be extremely valuable.
When you have poor credit, a credit card can help you to rebuild it. At the same time, very few card issuers will approve those with bad credit. Secured cards are available to nearly any applicant, but require the payment of a refundable security deposit before an account can be opened. But once your account is open, a secured card will work just like any other credit card. After a year of on-time payments, many secured card users will qualify for a standard, unsecured card.
These cards are offered to applicants with a history of credit problems, but without having to pay a refundable security deposit. Instead, cardholders must pay a variety of non-refundable fees, such as annual fees, monthly maintenance fees and authorized cardholder fees. Sub-prime cards will also have very high interest rates and few cardholder benefits.
Some credit card issuers recognize that college students may have a limited credit history, but they have an unlimited potential. These card issuers offer credit cards designed for full-time students. Student credit cards will have lower standards for approval, but less competitive rates, fees and rewards.
Business Credit Cards
Many business owners use credit cards to charge their company purchases, and keep them separate from their personal expenses. There are several banks and credit unions that offer credit cards for small business owners, and these cards work very much like other credit cards. Some small business credit cards will offer bonus rewards at office supply stores and on other purchases that businesses are more likely to make. These small business cards are not to be confused with corporate cards, which are only offered to medium and large businesses, nonprofits, and government entities.
At a time when competition is sorely lacking in many parts of our economy, it's hard to complain that we have too many choices when selecting a credit card. When you narrow down your options to the type of credit card you need, the kind of issuer you prefer, and the cards that you can qualify for, you'll be left with a much more reasonable number of products. By comparing the best options remaining, you'll be sure to find the right card for your needs.
Editorial Disclaimer: Opinions expressed here are author's alone, not those of any bank, credit card issuer or other company, and have not been reviewed, approved or otherwise endorsed by any of these entities. All information, including rates and fees, are accurate as of the date of publication.
This article was originally published on September 28, 2017, and has been updated.