How to Find the Best Credit Card for You
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"What’s the best credit card?"
It's a question we hear all the time from NerdWallet readers, as well as from family and friends. And we usually respond with a non-answer answer: “It depends.” That's because the best credit card for you does indeed depend on many factors, including your goals, habits, lifestyle and credit history. The best card for you may not be the best card for someone else.
Plus, your needs can evolve over time. What works for you now may not suit you later on. You may even decide you need more than just one card.
Still, the best credit cards all tend to have a few things in common. Here's how to get a sense of what might be the best credit card for you at the moment.
Types of credit cards
There are several major credit card issuers and literally thousands of cards, but most fit into the following categories:
CREDIT CARD TYPE
HOW IT WORKS
Get a certain percentage back on the money you spend. Redemption options can include a statement credit, check or direct deposit.
Best for: Anyone seeking the simplicity and flexibility of cash back, especially if you don't travel often.
Earn points or miles with each purchase. Redeem for airfare, hotel stays and other travel expenses.
Best for: Those who travel often, especially internationally.
Transfer debt from another credit card and pay it down interest-free for a limited period of time.
Best for: Consumers with excellent credit who plan to pay down the balance before the 0% interest period ends.
Minimize the amount of interest you’ll pay on balances you carry from month to month.
Best for: Consumers who qualify for the lowest interest rate a card offers and who plan to carry a balance.
Designed for consumers with bad credit or no credit history. They require an upfront deposit, which is typically equal to your credit limit.
Best for: Those who are looking to build their credit. Many cards require not just a deposit, but also a bank account to fund that deposit (though there are exceptions).
Designed for college students looking to build their credit history, although income and age requirements still apply.
Best for: Students under age 21 with independent income, or students age 21 and up who rely on their own earnings, or those of a spouse or partner.
Tailored toward entrepreneurs who need to charge large expenses and provide cards to employees.
Best for: Business owners, including sole proprietors, freelancers and side hustlers.
What type of credit card matches your needs?
Here are some questions to ask yourself:
Do you plan to carry a balance?
Look for a low-interest or 0% credit card. Rewards cards tend to have higher APRs, and when you carry a balance, the interest you'll pay on it will likely offset any rewards you earn. So a rewards card wouldn’t be the best choice.
Do you have existing credit card debt you want to pay down?
Consider a balance transfer credit card with a 0% intro APR period. When you check out offers, ask these questions:
How long does the 0% period last, and is it enough time to pay off your debt?
Does the 0% apply only to transferred balances or also to new purchases? Ideally, it would apply to both.
How much is the balance transfer fee? Typical fees range from 3% to 5% of the transferred balance, but some cards charge no balance transfer fee.
Would you like cash back on your purchases?
Cash back is the most flexible type of credit card reward. But you’ll need to decide what type of cash-back credit card works best for you:
A card that pays you a flat rate on all spending. Aim for at least 1.5% back, although you can find cards that earn 2% back.
A card that pays higher rates in specific categories, such as gas or groceries, and a lower rate on everything else.
A card with bonus categories that change throughout the year.
How much do you travel?
With travel credit cards, you earn points or miles that you can use to book travel or redeem for credit against travel expenses on your statement. This is great if you travel frequently. But if you don't travel much, or at all, your rewards will just pile up unused; in that case, a cash-back card is better.
Do you mind paying an annual fee?
Many rewards credit cards can give you more than enough back in rewards to make up for the annual fee. Still, if you're averse to fees in general, there are good credit cards with no annual fee.
What credit card rewards are right for you?
Cash-back cards earn a percentage back of every dollar you spend. Typically, you can redeem for a statement credit or actual cash back. There are three kinds of cash-back cards:
Flat-rate cards: These cards earn the same rewards rate, no matter where you use your card. For example, the Citi® Double Cash Card earns 2% cash back — 1% when you make a purchase, and 1% when you pay your bill. Because your rewards rate is the same everywhere, these are the lowest-effort cash-back cards.
Tiered bonus cards: These cards earn a higher cash-back rate in certain spending categories, and 1% back everywhere else. If you tend to spend the most in these areas, these cards can supersize your earning power. The Capital One Savor Cash Rewards Credit Card earns 4% cash back on dining, entertainment and eligible streaming services; 2% at grocery stores and 1% everywhere else. Prefer a night in after your long commute? The Blue Cash Preferred® Card from American Express earns 6% cash back at U.S. supermarkets (on up to $6,000 in spending per year, then 1%), 6% on select U.S. streaming services, 3% on eligible transit and at U.S. gas stations, and 1% everywhere else. Terms apply (see rates and fees).
Rotating bonus cards: These cards cycle through different bonus categories on a monthly or quarterly basis, often offering a high rate of 5% back in these areas. However, it takes more effort to remember which card to use when (especially since you may have to activate the new bonus categories whenever they switch). The Chase Freedom Flex℠ and Discover it® Cash Back both earn 5% cash back on up to $1,500 per quarter in spending in bonus categories that you activate, and 1% cash back on other spending. Bonus categories have historically included things like gas stations, restaurants and grocery stores.
If you spend a lot at a specific store, it may be worth getting that retailer's co-branded credit card for the rewards. For instance, the Costco Anywhere Visa® Card by Citi gives you 4% cash back on gas and EV charging purchases (up to $7,000 a year in spending), 3% back on restaurants and travel, 2% on all purchases at Costco and Costco.com, and 1% on everything else. The Amazon Prime Rewards Visa Signature Card, meanwhile, earns 5% back on Amazon.com and at Whole Foods. You'll also earn 2% back at restaurants and gas stations, plus local transit and commuting (including rideshare). All other purchases earn 1% back.
The more often you travel, the more value you stand to get out of a travel rewards credit card. In fact, a NerdWallet study found that domestic travelers who spent more than $8,600 per year on travel, or anyone who took at least one international trip per year, can benefit the most from travel cards. Travel cards fall into two basic camps:
General travel cards: If you’ll fly any airline or stay in any hotel so long as the price is right, a general travel rewards card will give you the most flexibility when it comes to earning and redeeming points. Flat-rate travel cards like the Capital One Venture Rewards Credit Card earn the same number of points or miles for every purchase (in that card’s case, you’ll earn 2 miles per $1 spent for most purchases). Tiered travel cards earn more for specific purchases, like the Chase Sapphire Preferred® Card, which offers 5 points per $1 spent on all travel purchased through Chase Ultimate Rewards®; 3 points per $1 spent on dining (including eligible delivery services and takeout), select streaming services, and on online grocery purchases (not including Target, Walmart and wholesale clubs); as well as 2 points per $1 spent on travel not purchased through Chase Ultimate Rewards®; and 1 point per $1 spent on other purchases.
Co-branded travel cards: If you frequently fly a specific airline, consider airline credit cards, which give you perks like free checked bags, priority boarding and extra frequent flier miles. If you often book with specific hotel chains, you may want to look at hotel credit cards, which allow you to earn free nights and upgrades.
How much effort are you willing to put in?
Your ideal credit card, or combination of cards, also comes down to how much energy you care to expend on managing the contents of your wallet. You can keep things simple with one rewards card you use for everything, or pair multiple cards to maximize your earning potential. The "Chase Trifecta," for example, is popular with travel card fans.
Setting a strategy for redeeming rewards is important, too. Cash-back cards make it easier, requiring you to simply request a statement credit. Some travel cards operate similarly, allowing you to get a statement credit to cover past travel expenses, while with other cards, you cash in points to pay for travel booked through the card’s website.
So when it comes to "the best credit card," you can see why we say that it depends. When you’re shopping for your own best card, make sure you know what you can qualify for, as well as what type will best suit your goals or spending habits.
What credit card are you likely to qualify for?
Know your credit score
Credit cards may require applicants to have attained fair, good or even excellent credit to qualify. That means that the best credit card for you needs to match where you are now in terms of your credit scores. (Your scores are just the start, though; income and other factors are considered when you apply.) Find out your credit score for free on the NerdWallet app.
Cards listed on NerdWallet have a "recommended credit score," to give you a sense of whether you could qualify. Our credit card comparison tool allows you to filter cards according to credit score.
If necessary, work to rebuild your credit
In general, the better your score, the better the cards you'll qualify for. Good to excellent credit (typically FICO scores of at least 690) can qualify you for higher rewards, lower interest rates and more perks. So if your credit score isn’t quite where you would want it to be, what can you do?
Start by checking your credit report, because errors and long-forgotten debts can have negative effects. You can get one free report per year from each of the three major credit bureaus — Equifax, Experian and TransUnion — at AnnualCreditReport.com. Dispute any errors with the credit bureaus.
From there, adopt credit-building habits. A secured credit card can help you establish your credit history, but be sure to pay your credit card bill on time (and ideally in full) each month. Pay other bills on time, too, like your electricity or gas bills. Limit your credit card spending to no more than 30% of your total credit limit each billing cycle. If you have a low credit limit, that may mean you should use your card for a few expenses, and pay with cash or a debit card for the rest. Be patient through this process — it can take time before your new habits result in an increase for your credit scores.
» MORE: 7 ways to build credit fast
Information related to the Amazon Prime Rewards Visa Signature Card and the Capital One Savor Cash Rewards Credit Card has been collected by NerdWallet and has not been reviewed or provided by the issuer of this card.
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