A credit card can be a useful tool or it can be a dangerous weapon. Most of this depends on you — the best credit card in the world won't help if you spend beyond your means. American adults carry thousands of dollars in average credit card debt. I lived a decade mired in it and I don't recommend it to anyone.
If you're responsible, however, a credit card can be both convenient and efficient. I have mentioned that I save 1% on my utilities by paying with my cash-back credit card. These are expenditures I'd make anyhow, but the card saves me money. (As a bonus, using the credit card helps with my quest for a paperless personal finance system.
But there are hundreds (thousands?) of different credit cards to choose from. You can compare each card against the average credit card rates , but beyond that how can you tell which is best?
How to choose a credit card
When readers have asked me for credit card recommendations in the past. I've always declined. First, I'm still not completely convinced that credit cards are a good idea. Second, I don't have the resources to judge which cards are best. I do know, however, that it's important to choose the right card for your lifestyle. So i turned to our partner site CardRatings.com which was founded by consumer credit advocate Curtis Arnold, and focuses on making credit cards easy to compare – their credit card comparison table is a good place to start.
- If you are are someone who revolves a balance credit card debt, focus on cards that offer low interest rates (especially on balance transfers) — and put a stop to new charges.
- If you pay your balance in full every month, find a cash back credit card with no annual fees and a solid cash rewards program.
- Some credit card users have special needs. If you spend a lot on gas, consider a gas credit card that gives added rewards on auto expenses. If you travel a lot, look for a card with rewards for flights and lodging.
When choosing a credit card, Money magazine recommends you pay special attention to the Schumer Box, a prominent table in every credit card application. In general it's important that you understand the different aspects of the credit card application. Look for:
- An annual percentage rate (APR) of 11% or less on purchases.
- Low rates on other loans, such as cash advances or balance transfers. (If you're doing a balance transfer, find a balance transfer card that offers 0% APR, at least for a year.)
- Reasonable penalty terms. Find the penalty rate (or default rate), and follow the asterisk to see what triggers it.
- Finance charges that are not computed using two-cycle billing. (Two-cycle billing sucks.)
- No annual fee.
Don't choose a card just because it offers a signup bonus or because it gives you a discount at your favorite store. Read the terms and conditions. Understand the card's limitations. Remember: your goal is to pick a tool, like a vacuum cleaner. You're not looking for a one-time bonus, but a long-term relationship you can live with.
The Best Credit Cards
Consumer Reports wrote an article about using credit cards sensibly without falling prey to their traps.
Below the table, the CardRatings research staff provide their top picks for the best credit card offers for 2014 by category, breaking out many of the card details so you can compare things like interest rates, bonus rewards and balance transfer promotions on the best credit cards out there.
Best Low Interest Rate Cards If you're more interested in a rock-bottom interest rate than cash back, merchandise, or travel, here are some of the very best low-interest rate credit cards available. The first two are based on straight APRs, the last three are based on introductory rates for new accounts only:
- Iberiabank Visa® Classic. This credit card issuer was one of the first in the industry to get rid of over-limit fees. The variable Annual Percentage Rate (APR) tiers for purchases this card offers is also one of the lowest in the industry.
- Simmons First Visa® Platinum. This bank, actually a collection of Arkansas community banks, has one of the lowest variable Annual Percentage Rate (APR) for purchases in the industry.
- USAA Rate Advantage MasterCard®. The as-low-as 6.9% APR makes this a great card for consumers with excellent credit. One catch is USAA Bank credit cards are exclusively available to military members, veterans who have honorably served, and their eligible family members. If you qualify, the legendary customer service USAA is known for is an added bonus.
- Chase Slate®. This no-frills credit card offers 0% introductory APR for 15 months on purchases and balance transfers. After the introductory period expires the purchase and balance transfer APR will vary with the market based on the Prime Rate. As an introductory offer if you transfer a balance during the first 60 days your account is open you will not be charged a balance transfer fee. Slate also comes with Chase's Blueprint system to help you manage your spending.
Best Cash Back Cards You can't beat cold hard cash, no matter what the state of the economy. Here are the top credit cards that offer the best percentage cash back deals:
- Fidelity Investment Rewards American Express. This cash back credit card lets you deposit up to 2% cash back of your purchases into your eligible account with Fidelity.
- Capital One® QuicksilverOne® Cash Rewards Credit Card
There are a lot of advantages with the Capital One® Quicksilver® Cash Rewards Credit Card.
Here is their current offer: (Updated on 7-27-16)
— A one-time $100 cash bonus after you spend $500 on purchases within the first 3 months
— Earn unlimited 1.5% cash back on every purchase, every day
— Every 10th Uber ride is free up to $15 when you pay with your Quicksilver® card through March 31, 2017
— No rotating categories or sign-ups needed to earn cash rewards (plus, cash back doesn't expire and there's no limit to how much you can earn)
— Pay no annual fee or foreign transaction fees
The Capital One® Quicksilver® Cash Rewards Credit Card is also offering:
— 0% intro APR on purchases for 9 months, with 13.24% — 23.24% variable APR after that
— Balance transfers also have a 0% intro APR for 9 months; 13.24% — 23.24% variable APR after that; a 3% fee applies to each balance transferred
Compare this card with others in its category and apply here. You'll need good to excellent credit to be considered for this credit card.
Best Travel Miles Cards If accumulating travel miles to a trip to Europe or anywhere else in the world is a better incentive for you than cash, try these cards:
- The Capital One® Venture® Rewards Credit Card is one of the best travel rewards credit cards available today, as evidenced by the current offering (updated on 7-27-16)
— Enjoy a one-time bonus of 40,000 miles once you spend $3,000 on purchases within the first 3 months, equal to $400 in travel
— Earn unlimited 2X miles per dollar on every purchase, every day
— Fly any airline, stay at any hotel, anytime
— Travel when you want with no blackout dates
Plus, miles don't expire and there's no limit to how many you can earn. The Capital One® Venture® Rewards Credit Card also has:
— No foreign transaction fees
— $0 introductory annual fee for the first year; $59 after that
From our perspective, not being charged the typical 1% to 3% foreign transaction fee can be a great benefit all on its own if you spend money on purchases outside the U.S.! You can compare this card against other rewards credit cards here
- PenFed Premium Travel Rewards American Express® Card. This flexible travel rewards card has no annual fee and no foreign transaction fee. The card's 5 points per dollar on airfare purchases is one of the best travel rewards programs around. You need to be a member of PenFed Credit Union to apply for this card.
- Chase Sapphire Preferred®. Chase is currently offering 50,000 bonus points worth $625 toward airfare or hotel accommodations when you redeem through Ultimate Rewardsâ„ after you spend $4,000 in the first 3 months of Cardmembership. You can also earn two points per dollar spent on travel and dining at restaurants. They also recently dropped the foreign transaction fee. There is an introductory annual fee of $0 for the first year, then $95 after that.
Best Reward Points Cards If you'd rather not have your points limited to airline travel, try these cards:
- Fidelity® Investment Rewards® Visa Signature® card. Card members get 1.5 points for every dollar they spend on the first $15,000 in purchases per year, and 2 points per dollar in purchases thereafter. The redemption system is online and easy to negotiate: you can convert 5,000 points into a $50 deposit to qualifying Fidelity brokerage accounts. But if you would rather spend the cash on something more frivolous than your retirement, you have that option too–there's a list of travel and luxury retail rewards as well. And there's no hurry to redeem the points; you can take up to five years to turn them in.
- Amazon.com Rewards Visa® Card from Chase. The Amazon Visa can earn as much as 3 points on your online shopping sprees on Amazon.com and pay with reward points at checkout.
Best “Bad / No Credit” Credit Cards These are not the old subprime lenders of pre-crash era; the new poor/fair credit card lenders are both financially sound and ethical:
- USAA Secured Credit Card. If you or a family member served in the military, you can get the full benefit of a card secured by an interest-earning CD, for a low annual fee. You have a choice between American Express® or MasterCard® version of the card, both offer the same rate and annual fee however the perks and benefits differ.
Most Innovative Credit Card. Capital One gets kudos from us for being straight forward, using clear language on its website and in monthly statements to explain how to build and maintain good credit, and for finding creative ways to encourage young consumers to develop good credit habits. A higher-than-average APR may encourage card holders to pay their balances in full each month, which would help establish good financial habits. CardRatings rounds up a list of their cards here
You can research other cards at the following sites:
- CardRatings.com is part of U.S. Citizens for Fair Credit Card Terms, a consumer advocacy group devoted to educating consumers about credit cards.
- GetRichSlowly has steps to get free online credit report.You can check:how to get free credit report as well as our own credit card comparison tables.
- In Canada, try Money Tools, a website run by the Financial Consumer Agency of Canada. It provides an interactive credit-card selection tool.
Please make sure to double-check offer terms at the card issuers website as terms change frequently and the information above may not be up to date by the time you read this. If you choose to use credit cards, make a commitment to use them responsibly. I believe that most of the people who read this site are ready to do so. Like me, you may have had trouble in the past, but the fact that you're willing to learn more about personal finance demonstrates that you have some semblance of discipline. Use it. Finally, here's an infographic from CardRatings on how to choose a credit card.
Author: J.D. Roth
In 2006, J.D. founded Get Rich Slowly to document his quest to get out of debt. Over time, he learned how to save and how to invest. Today, he's managed to reach early retirement! He wants to help you master your money — and your life. No scams. No gimmicks. Just smart money advice to help you reach your goals.