Find the Best Credit Cards in 2020
When used the right way, credit cards can be a useful tool in managing your money, improving your credit, earning points, and traveling with perks. There isn’t a one-size-fits-all card, so you’ll probably have to sift through the near-endless options in the market to find the perfect fit for your wallet. What works for your traveling buddy may not suit your needs.
Finding the best credit card isn’t always an easy task, so we’ve broken down the fine print to narrow down your search for the right card.
Compare the Best Credit Cards
Given the wide range of annual fees, rewards and benefits available, it’s almost impossible to choose a single best credit card. Instead, start by comparing the options at your disposal. The best way to approach your search is to break down credit cards by category—0% APR, rewards and building credit.
For instance, if you’re looking to earn travel, you’ll want to look at travel rewards cards. Are you just getting started with credit? A student credit card or one that doesn’t need a high FICO score may prove ideal.
Types of Credit Cards
Credit cards are designed for different spending habits. The ideal card for one shopper may be a disaster for someone who likes traveling. These credit cards include options for those with poor credit or no credit, those looking for rewards and business cards. Here are the main types of cards available today.
Cash Back Credit Cards
A cash back credit card returns a percentage of each dollar you spend on your credit card. You can later withdraw what’s owed, or use the money to pay back your credit card balance. The amount of cash back you can earn varies from as little as 0.5 cents per dollar (0.5%) to 4 cents per dollar (4%) on certain categories—like grocery stores and gas stations.
If your credit card offers 0.5% cash back on all purchases, you’ll get back $5 for a $1,000 purchase. Your cash back rewards can be returned to you either as a deposit in your bank account after hitting a particular milestone or as a credit on one of your monthly statements. American Express and Citibank are good cash back credit card issuers.
Rewards Credit Cards
A rewards credit card gives you a tangible benefit. Any purchases you make will help you accumulate credits or accrue points that you can later redeem for something of higher value, like a hotel room or plane ticket. Your account with the card issuer must be in “good standing” to accumulate and redeem your rewards.
Travel Credit cards
Travel credit cards make it cheaper for you to spend money abroad. Some could even reward you for traveling. Usually, these cards don’t charge a fee for use overseas, and their exchange rates are attractive.
Low-Interest Credit Cards
A low-interest credit card can help you save a lot of money in unwanted interest charges if you carry credit card debt or frequently have difficulty paying off the full balance every month. Low-interest credit cards also charge lower fees on cash advances. Be sure to determine at the outset whether your savings on interest payments are greater than the card’s annual fee.
No-Fee Credit Cards
No-fee credit cards usually have no annual fee, unlike most reward credit cards. As a result, no-fee cards have fewer perks and rewards. This type of card is a perfect match if you’re a beginner who wants to build their credit history. You could also pick it as a second credit card to complement a more premium card you often use.
Credit Card FAQ
How do you apply for a credit card?
Applying for a credit card and waiting for approval can feel scary, especially if it’s the first time. You’re merely asking the card issuer to take a chance on you, so you must be realistic with your expectations. Remember, a little preparation will come in handy when applying for a new card. Here’s how to apply for a credit card in 5 steps.
Check Your Credit Score
Knowing your credit score and what’s in your credit report will help you determine what credit products to apply for. Your credit score is a 3-digit number that tells the relative quality of your credit history. You may check your credit score through your card issuer or order it from one of the leading credit bureaus – Experian, Equifax and TransUnion.
Lenders use your credit score to evaluate the risk you’ll pose when it’s time to pay your balance. You’ll receive better offers if you have a higher score. Your FICO score and the contents of your credit report will determine the products to apply for.
Decide On The Best Card For You
Deciding the best card for you is best based on what you plan to use it for. Credit cards fall into three main categories:
- Rewards cards. These can be flexible rewards, cashback, hotel or airline loyalty-based rewards.
- Low APR cards. Some credit cards have 0% APR introductory offers on balance transfers or purchases or lower-than-average continuing interest rates.
- Credit-building cards. These cards are usually easier to qualify for if you’re trying to repair or build credit.
Knowing your goal will help you narrow down the options within a specific card category.
Check Whether You’re Pre-qualified
Some issuers like Bank of America, Citibank, Chase and American Express will check whether you’re pre-qualified for any of their credit cards. Prequalification doesn’t guarantee approval, but it means the lender – guided by some credentials – thinks you stand a better chance.
Enter Your Information
Applying for the card you’ve chosen can be done online or in-person at your issuing bank’s branch. You’ll need to provide personal information like your name, citizenship status, Social Security Number, contact information, birth date, income and monthly rental or housing expenses. You should receive feedback quickly if you’re applying online.
Understand Your Card’s Terms And Conditions
So, you’re approved! Now what? Be sure to understand your card’s terms and conditions, typically listed in your cardmember agreement, as well as billing due date is, what credit limit you’re approved for, and what the APR is. Take a look at all the fees and rates associated with the card, including annual fees, balance transfer fees, foreign transaction fees and any penalty fees or APRs.
How do you get a credit card with bad credit?
Bad credit shouldn’t prevent you from getting a credit card. Although you won’t be approved for every card, if you have poor credit history, there are two types of cards to consider: secured and subprime. These cards are designed for people with poor credit or no credit and their use can present additional financial possibilitiesA secured card works almost like any other card, but you must submit a refundable security deposit before you can open an account. After opening your account, you’ll use the card as an unsecured credit card, but should you default, your lender may hold the security deposit to cover the debt. Using your card responsibly will increase your credit score, and you may qualify for a non-secured card.
On the other hand, a subprime credit card is an unsecured card designed for people with bad credit. No security deposit is required, so the card issuer imposes substantial credit card fees to account for the higher risk of lending to individuals with bad credit.
How does credit card interest work?
Credit card interest is the cost of borrowing money with your credit card. It’s what you’re charged when you fail to pay your credit card bill by the due date. All credit card purchases are subject to a standard rate called an Annual Percentage Rate (APR), which varies from person to person and card to card depending on various factors. The APR is expressed in terms of a year, but credit card issuers use it to calculate charges over the monthly statement period.
To find the amount of interest you’re paying on your balance sheet every day, convert it to a daily percentage rate by dividing your APR by 365. Your card issuer multiplies the current balance by the daily rate to determine your daily interest charge, compounded daily.
The best approach to credit card interest is to avoid it altogether. Considering that credit card APRs could go beyond 18%, it makes no sense to keep a balance on your card. You won’t have to worry about interest charges if you pay in full each month.
How many credit cards should I have?
There isn’t a rule of thumb for this—you can have more than ten cards and maintain an excellent credit score, but this would add to your annual fees. Take it slow, space out your card applications and don’t chew more than you can swallow. You must be able to settle your balances in full every month—after all, earning rewards isn’t worth going into debt.