Choosing a credit card is daunting. With so many options on the market, it’s easy to get decision paralysis, especially if it’s your first time credit card shopping.
So what do you do?
Here’s what you’re not going to do: spend days researching every single card out there. It’s almost impossible (and a waste of time) to sift through hundreds of choices.
All you have to do to find the best credit card for you is to narrow down your choices based on your financial goals and spending habits.
To make it easier for you, we’ve already done this. Read on to find out how to decide which credit card to get and what type benefits you the most.
Should I Get a Credit Card?
In today’s increasingly cashless world, credit cards almost feel like a necessity. More vendors prefer digital payments over cash, while some businesses like hotels and airlines, insist on credit card payments to secure your booking.
Although they can make life easier, carrying the responsibility of owning a credit card isn’t an easy decision.
If not carefully managed, credit cards can tempt you to overspend, accumulate debt, and damage your credit score. If you’re prone to spending beyond your means or struggling with debt, a credit card may not be a good choice at the moment.
However, when used responsibly, credit cards can be a useful tool to finance your purchases, build a strong credit score, and earn valuable rewards from your spending.
If you’re shopping for a credit card, make sure you understand how to use it wisely and learn about credit before you sign up for one.
How Do I Pick the Right Credit Card?
The search for a credit card can be overwhelming if you don’t know where to start. Here are the steps that will guide you in the right direction.
Check Your Credit Score
Before you look for a credit card, it’s important to understand how credit scores work and find out what your credit score is.
Many financial institutions offer their customers complimentary credit score checks. You can also request a free copy of your credit report from any of the three major credit reporting agencies – TransUnion, Experian, and Equifax.
Your credit score will determine what type of credit card you can qualify for. For example, you can get a basic credit card even with a poor credit score, but you need very good credit to qualify for a rewards-focused credit card.
With a high credit score, you can successfully qualify for almost any type of card. If your score is lower you can still get a card, but your options will be limited.
Consider Your Needs and Goals
The best credit card for you is the one that meets your unique needs. For example, a student who’s just starting to build credit will need a different credit card than a frequent traveler who wants to collect air miles.
🤔 Before getting started, ask yourself the following questions:
- What do I want to get out of my credit card? Common goals include day-to-day spending convenience, earning air miles, or building credit.
- What will I be using it for? Look for a card that aligns with your spending pattern to ensure you’re getting the best value from it. According to the 2021 J.D. Power U.S. Credit Card Satisfaction Study, many customers have the wrong card — their spending patterns don’t match their card’s reward programs.
- What features matter the most to me? Rank the features that you value the most. Features customers value most include rewards programs, a low interest rate, and credit-building tools.
Questions like these can help you figure out what you want to get out of your card and what features you want to prioritize when shopping for one. The more you understand your needs and goals, the easier it will be to find the right card for you.
8 Different Types of Credit Cards
The different categories below will help you narrow down your options when you’re credit card shopping. Consider choosing a card that aligns with your spending habits, lifestyle, and financial goals.
1. You Want an Affordable Credit Card: No Annual Fee Credit Cards
Owning a credit card doesn’t have to come with a price tag. If you only plan on using your card occasionally or you’re trying to save money, a credit card with no annual fee is a great option.
Many credit cards offer valuable benefits and features without charging a yearly fee, allowing you to get the flexibility of having credit without the upfront cost. Focus your search on credit cards with a $0 annual fee that offers robust rewards you value.
For example, if you like cash back rewards, choose a no-fee card with a generous cash back rewards rate.
OUR PICK
Chase Freedom Unlimited
👉 Why we picked it:
- No annual fee
- 1.5-5% cash back
- Earn a $200 bonus + 5% gas and grocery store offer
- 0% intro APR for 15 months on purchases and balance transfers
2. You’re a Student: Student Credit Cards
Student credit cards are specifically designed for young college or graduate students.
Since most students have little or no credit, the main purpose of this credit card is to help them build a solid credit history. A good credit score allows you to get pre-approved more easily when you apply for car loans, mortgages, better credit cards, or any other loans.
If you use your card responsibly, it’s a good way to learn how to use credit, manage your money, and build your financial literacy. The majority of student credit cards have no annual fees, making them an ideal choice for the price-conscious college student.
While student credit cards don’t offer the same robust rewards that regular credit cards do, many of them do come with great perks. Look for a student credit card with a good rewards program or other benefits, like a sign-up bonus.
OUR PICK
Discover it Student Cash Back
👉 Why we picked it:
- No credit is required to apply
- No annual fee
- 5% cash back on rotating bonus categories
- Unlimited cash-back match at the end of the first year
- Flexible cash back redemption options
3. You Have Poor Credit or No Credit: Secured Credit Cards or Unsecured Credit Cards for Bad Credit
Your choices are limited when you’re credit card shopping with damaged credit or no credit history. Most credit card lenders will consider someone with bad credit or a thin credit file a risky borrower.
However, that doesn’t mean all hope is lost. Credit builder credit cards are a great alternative for people struggling with qualifying for credit.
Secured credit cards are the best option, followed by unsecured credit cards for bad credit. Both types of cards help you build credit from scratch or rebuild your credit score so you can qualify for a better credit card down the road.
Secured credit cards are a better alternative because they’re easier to qualify for, have lower annual fees, and reduce the risk of spending outside your means. With secured credit cards, you’re required to put down a cash deposit to secure credit. Because your own deposit secures the card, it prevents you from building up a big credit balance.
👉 Tip: Most cards for poor credit or no credit will give you a low credit limit. Your credit utilization is an important part of your credit score, so you’ll have to watch your spending and keep your balance below 30% of your credit limit.
When building good credit is your top priority, look for a credit builder card that has low fees and rewards responsible usage over one that offers rewards. To help you find the right card, we’ve rounded up the best secured credit cards and best unsecured credit cards for bad credit.
OUR PICK: BEST SECURED
Discover it Secured Credit Card
👉 Why we picked it:
- No credit score required to apply
- No annual fee
- Convert to unsecured card with responsible use
- 1-2% cash back rewards
OUR PICK: BEST UNSECURED
Petal® 1 “No Annual Fee” Visa®
👉 Why we picked it:
- Approval based on banking history, not credit score
- No annual fee
- 2-10% cash back rewards at select merchants
4. You’re a Frequent Flyer: Travel Rewards Credit Cards
Credit cards that offer travel rewards are best suited for cardholders who travel often and have a good-to-excellent credit score.
These cards give you the chance to earn points or travel miles through everyday purchases and travel-related expenses that can be redeemed toward travel. For example, airline miles can be used to redeem free flights or make your next trip more affordable.
Besides points and air miles, many travel cards come with various rewards meant to enhance your travel experience such as:
- Airport lounge access
- No foreign transaction fees
- Travel insurance
- Early boarding
- Free checked bags
- Hotel room or seat upgrades
If you’re loyal to an airline or hotel, consider a loyalty program card that offers airline or hotel-specific rewards. Otherwise, a flexible travel rewards card is your best choice.
Although many travel credit cards come with an annual fee, the rewards that come with them often offset the price tag if you’re earning enough points. Look for a card with robust rewards, a sign-up bonus, and the travel perks you value the most.
OUR PICK
Chase Sapphire Preferred®
👉 Why we picked it:
- 60,000 points intro offer
- High rewards for spending on travel and other categories
- No foreign transaction fees
- Trip cancellation insurance, primary rental car coverage, and lost luggage insurance
5. You Like Cash Rewards: Cash Back Rewards Credit Cards
The flexibility of cash back credit cards makes them some of the most popular rewards credit cards on the market.
Every qualifying purchase earns you a percentage of cash back that’s stored on your credit card account until you’re ready to redeem it. For example, a card offering 1.5% cash back gives you $15 for every $1000 you spend. Depending on the issuer, cash back rewards can be redeemed as gift cards, a statement credit towards your credit card balance, or even a direct deposit to your account.
Some cash back credit cards offer a flat percentage on every qualifying purchase, while others offer higher percentages of cash back on certain spending categories like dining, groceries, or gas.
If you use your credit card to pay for everything, a cash back card is a great way to put your spending to work. As long as you use it responsibly and pay off your bill each month, you can get a lot of value out of it.
To maximize your rewards, choose a card that has a high rewards rate, a generous sign-up bonus, and an annual fee that is worth the perks it offers.
OUR PICK
Discover it Cash Back
👉 Why we picked it:
- No annual fee
- 5% cash back on rotating spending categories
- Unlimited cash-back match at the end of the first year
- 0% intro APR for 15 months
6. You’re a Loyal Customer: Store Credit Cards
A store credit card is a type of credit card offered by a specific retailer like Walmart, Amazon, or Costco. Retailers use store credit cards to incentivize shoppers to spend more and build loyalty. In return, loyal shoppers receive rewards, ongoing promotions, and discounts that can be used in-store.
Some store cards can only be used at one specific retailer, while co-branded store cards that have a Visa, Mastercard, American Express, or Discover logo can be used everywhere.
According to experts, people should take caution before signing up for a store credit card. These types of cards have high interest rates and low credit limits. If you’re easily tempted to spend, it can be a dangerous slippery slope to accumulating debt and damaging your credit score.
While store credit cards have their drawbacks, you can still benefit from the rewards they offer as long as you use them responsibly.
OUR PICK
Amazon Prime Rewards Visa Signature
👉 Why we picked it:
- No annual fee
- $100 Amazon gift card sign-up bonus
- 5% rewards at Amazon and Whole Foods
- 2% rewards at restaurants, drugstores, and gas stations
7. You Want to Pay Off Credit Card Debt: Balance Transfer Credit Cards
If paying off credit card debt is your top priority, a balance transfer credit card with a 0 percent intro APR could be the tool you need.
This introductory offer lets you move high-interest credit card debt to another card with a lower promotional interest rate. Consumers can take advantage of an interest-free period of 12 months or longer which allows them to pay off their outstanding balance without being charged any interest fees.
With discipline, you can quickly chip away at your principal balance and save money on interest charges before the introductory offer expires.
👉 Tip: Make sure payments are always on time. A late payment could cancel your interest-free promotion.
If you’re looking to consolidate debts using a balance transfer credit card, we recommend one that has the following features:
- No balance transfer fees
- A 0 percent intro APR
- No annual fee
OUR PICK
Wells Fargo Reflect®
👉 Why we picked it:
- 0% APR for 21 months on purchases and balance transfers
- No annual fee
- $600 of cell phone protection
8. You’re a Business Owner: Business Credit Cards
Business credit cards are specifically designed for business owners who want to keep their business and personal expenses separate.
Small business owners can use business credit cards to make the most of business transactions while earning rewards on their everyday spending. Using a separate credit card for business-related purchases also makes it easier to track business expenses during tax season.
Business credit cards can offer an array of benefits like cash back, 0 percent intro APR, welcome bonuses, and more. Identify which benefits you value the most and choose the card that offers the best value for your business.
OUR PICK
Ink Business Unlimited®
👉 Why we picked it:
- 1.5% cash back on various categories
- No annual fee
- Bookkeeping software to manage business expenses and more
- 0% intro APR on purchases for the first 12 months
Choose the Card That Gives You the Most Overall Value
There’s no such thing as “the perfect credit card”— each credit card has its strengths and weaknesses. But that doesn’t mean the perfect credit card for you doesn’t exist.
Before you begin your search, ask yourself the right questions and understand your credit score. When you’re ready, look for a card that helps you maximize rewards and aligns with your financial goals and spending habits.
