By The best credit card depends on what you want it to do. That sounds obvious, but it’s easy for people to get backwards. A big welcome bonus catches your eye, or a premium travel card comes with a long list of perks, and suddenly you’re trying to justify why that card fits your life.
We’d start with your goals instead. Are you trying to earn cash back? Travel more cheaply? Pay off debt? Finance a big purchase? Build credit? Once you know that, a lot of cards can be crossed off pretty quickly.
Start with the problem you’re trying to solve
Most people shopping for a credit card fall into a few broad groups:
- You want cash back on everyday spending.
- You want travel rewards or travel perks.
- You’re carrying credit card debt and want to reduce the interest.
- You have a large purchase coming up and want time to pay it off.
- You’re building or rebuilding credit.
- You want a card for business spending.
The right features depend on which of those describes you.
If you’re paying a lot of credit card interest, we wouldn’t spend much time optimizing rewards. A balance transfer or 0% intro APR offer may save far more than a few extra points or a higher cash-back rate.
If you pay in full every month, now rewards and perks matter a lot more.
That’s one reason we don’t think every credit card should be judged the same way. A great balance transfer card and a great travel card are doing different jobs.
If you carry a balance, deal with the interest first
Rewards get most of the attention because they’re more fun to talk about. Interest can matter a lot more.
On a card with a grace period, you can generally avoid interest on new purchases by paying the balance in full by the due date. Once you start carrying a balance, you may lose that grace period and interest can accrue on new purchases too.
So if you’re regularly paying interest, we’d make debt payoff the priority.
A balance transfer card can be useful for existing debt. A card with a 0% purchase APR can make sense if you have a planned expense and know how you’ll pay it off before the promotional period ends.
The important part is having the payoff plan before you make the purchase or transfer the debt, not three months later when the balance is already there.
If you pay in full, decide whether you want cash back or travel rewards
For people who don’t carry balances, this is usually the more interesting part.
Cash back is the easy option
We mean that as a compliment.
You earn rewards, redeem them, and move on with your life. There’s no airline award chart to learn and no need to compare three different ways of using a point.
If you don’t want credit cards to become a hobby, cash back is hard to argue with.
Travel rewards can offer more upside, but they ask more of you
Travel points can be great if you travel regularly and enjoy figuring out how to use them.
Some programs let you move rewards to airline or hotel partners. Others give you better value when you book through the issuer. That creates more possibilities, but also more homework.
Our view is pretty straightforward: if learning how travel points work sounds interesting, go for it. If it sounds annoying, take the cash.
You’re not doing rewards wrong because you chose the simpler option.
Look at where your money actually goes
This is where headline rewards rates can fool you.
Imagine one card advertises an eye-catching grocery rate, but half of your “grocery” spending actually happens at a warehouse club that doesn’t qualify. Another card with a less exciting headline rate could easily put more money back in your pocket.
Pull up a couple months of spending and see where the money really goes:
- Groceries
- Restaurants
- Gas
- Travel
- Online shopping
- General spending that doesn’t fit a bonus category
Then look at how the cards you’re considering reward those purchases.
We’d rather choose a slightly less flashy card that fits our real spending than a theoretically perfect card we barely use correctly.
And if most of your purchases are spread all over the place, that tells you something too. A strong flat-rate card may make more sense than chasing categories.
Don’t assume an annual fee is a bad thing
A card with no annual fee is easier to justify. That doesn’t automatically make it a better deal.
The CFPB recommends comparing the cost of an annual fee with the rewards and benefits you expect to get from the card. That’s exactly how we’d think about it.
Suppose a card has a $95 fee but gives you benefits you would have happily paid $250 for anyway. Fine.
Now suppose a premium card comes with a dining credit at a service you never use, a hotel credit that requires you to book differently, and lounge access at airports you rarely visit. The issuer may put a big dollar value on that package. We wouldn’t.
We think annual-fee math gets distorted when people count benefits at full face value even though they’d never have bought them on their own.
Welcome bonuses are great, but don’t let one pick the card for you
We think welcome bonuses get too much attention when people compare cards.
They can be extremely valuable. They’re also a one-time benefit.
The two questions we’d ask are:
Can I earn the bonus with spending I was already going to do?
Will I still want this card after I’ve earned it?
If you need to invent purchases just to hit a spending requirement, the bonus has started working against you.
And a huge first-year offer doesn’t rescue a card you’ll have no use for in year two. We’d rather see a strong bonus attached to a card that already makes sense for you.
Decide how much complexity you’re willing to manage
You can absolutely earn more by carrying several cards.
One card for groceries. Another for dining. Another for travel. Maybe a rotating-category card on top of that.
Some people enjoy squeezing the last few dollars out of every purchase. If that’s you, great.
If you know you’ll forget which card earns what, don’t build a wallet that requires a spreadsheet. A good one-card setup can be better in real life than a four-card setup that wins on paper.
This is one of the reasons we like cards that do several things well. Maximum theoretical rewards aren’t the same thing as maximum useful rewards.
Pay attention to foreign transaction fees if you travel
This feature is irrelevant right up until it isn’t.
If you rarely make purchases outside the U.S., we wouldn’t give foreign transaction fees much weight. If you travel internationally, they move way up the list.
The CFPB specifically suggests that frequent overseas travelers consider a card with a lower or no foreign transaction fee.
Also, “foreign transaction” doesn’t always mean physically swiping your card in another country. Depending on the issuer’s terms, a fee can sometimes apply to a transaction involving a foreign merchant even when the purchase is made online.
For someone who travels a lot, we’d generally prefer not to think about that every time we use the card.
Your first credit card has a different job
If you’re choosing your first card, we’d keep the priorities fairly boring.
That’s a good thing.
Your first card is partly about establishing a credit history and proving you can manage an account responsibly. A card you can keep for years may be more useful than one with an amazing short-term offer that doesn’t fit you afterward.
We’d generally look for:
- No annual fee, or one that’s extremely easy to justify
- Straightforward terms
- Rewards you can understand and actually use
- A card that fits your current credit profile
- An issuer that reports the account to the credit bureaus
If you can’t yet qualify for a traditional unsecured card, a secured card can be a legitimate way to start building credit. The CFPB specifically lists secured cards as one option for establishing or rebuilding credit history.
Your first card doesn’t need to be impressive. It needs to be useful and manageable.
Don’t apply blindly
A credit card application generally results in a hard inquiry, which can affect your credit score.
We wouldn’t obsess over one inquiry. But there’s also no reason to fire off applications for cards you’re unlikely to qualify for.
Check your credit first. Look at the issuer’s stated credit guidance when it provides any. If you receive a prescreened offer, remember that it still isn’t final approval: you must apply, and the issuer can recheck your credit and other information before approving the account.
That’s enough caution. You don’t need to be scared of applying for a card that genuinely fits you.
Read the boring stuff before you apply
This is the least fun part of choosing a card and one of the most useful.
Check:
- Annual fee
- Purchase APR
- Any introductory APR and when it ends
- Balance transfer fee, if you plan to transfer debt
- Foreign transaction fee
- Late fees and other important charges
- Rewards caps or exclusions
- Welcome-bonus requirements
Federal law requires issuers to provide key credit-card disclosures clearly, including important rates and fees.
You don’t need to read every sentence of a 20-page card agreement before applying. But you should understand anything that could materially change the reason you want the card.
A great advertised rewards rate isn’t so great if your normal purchases don’t qualify for it. A long intro APR isn’t useful if you misunderstand when it ends. A premium travel card can be a lousy deal if most of the perks go unused.
How we think about credit card ratings
We analyze dozens of data points when we rate credit cards, but the weights change depending on the category.
That’s intentional.
For a balance transfer card, we care a lot about how much time you get and what it costs to move the debt.
For a cash-back card, we care more about earning rates, caps, and how broadly the rewards apply.
Travel cards have a different set of priorities again.
The data gives us a consistent framework, but it doesn’t replace judgment. We still ask whether the card is something we’d feel comfortable recommending to someone we know.
[See how we rate credit cards →]
A simple checklist before you choose
Before applying, we’d want good answers to these:
- What do I actually need this card to do?
- Do I pay my balance in full or am I trying to get out of debt?
- Where does most of my spending go?
- Do I want simple cash back or am I willing to learn a travel-rewards program?
- Will I actually use the benefits I’m paying for?
- Does the annual fee make sense based on my habits?
- Can I earn the welcome bonus without spending extra money?
- Will I use the card internationally?
- Do I have a reasonable shot at approval?
- How many cards do I actually want to manage?
You usually don’t need hours of research after that. Once you answer those honestly, a lot of cards stop being contenders.
The bottom line
Choose the card for the job.
If you’re paying expensive interest, solve that first. If you pay in full every month, focus on rewards and benefits that match the way you already spend. If you travel, pay attention to the costs and perks that will actually affect your trips.
The card should fit your financial life. You shouldn’t have to redesign your financial life to justify the card.
Frequently asked questions
What type of credit card is best for everyday use?
For many people, a cash-back or rewards card that earns well across normal spending works well as an everyday card. If you don’t want to track bonus categories, a flat-rate card can be especially easy to manage.
Should I choose a card with no annual fee?
Not automatically. A card with an annual fee can still be the better deal if the rewards and benefits you’ll genuinely use are worth more than the fee. CFPB guidance recommends making exactly that comparison.
Is a rewards card worth it if I carry a balance?
Usually we’d deal with the interest first. On cards with a grace period, paying the balance in full by the due date can let you avoid interest on purchases. Carrying a balance can eliminate that advantage and make the interest cost much larger than the rewards you’re earning.
Is cash back or travel rewards better?
Neither is automatically better. Cash back is simpler. Travel rewards can offer more options for people who travel regularly and are willing to put some effort into learning the program.
Does applying for a credit card hurt your credit score?
A full credit card application generally creates a hard inquiry, which may affect your credit score. The impact varies with your overall credit profile.
Does a prescreened credit card offer mean I’m guaranteed approval?
No. A prescreened offer means you met certain criteria used to make the offer, but you still have to apply. The issuer can review updated credit information and other factors before making a final decision.