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The smart Investor unbiased experts reviews the top US credit cards in every major category, from rewards to student cards. Understand cards pros and cons, sign up bonuses, rewards and fees.
There are thousands of different types of credit cards, and finding the right credit card can save you hundreds or thousands of dollars every month. Credit cards vary in the credit terms they offer, and they have different interest rates, rewards perks, interest rates, and operating fees.
The following are the main differences between the different types of credit cards:
Credit limit is the highest amount of credit that a lender extends to a borrower. This balance takes into account online and in-store purchases, cash advances, credit card fees, etc. If you exceed the set credit limit, the lender may increase the interest rates, or charge an over-the-limit fee. This limit is not fixed, and it can change from period to period as the cardholder improves his/her creditworthiness.
APR is the cost of borrowing a loan, and it is stated on a yearly basis. Credit card issuers charge different APRs from each type of balance, including cash advances, balance transfers, or purchases. APR can be a fixed rate or a variable rate.
A variable APR changes over time depending on the prevailing index rate, while a fixed APR remains constant but is subject to change, and the credit card issuer must issue a written notice before interest rate changes are implemented. Before settling on a specific credit card, compare the APR for different types of credit cards to find the cheapest option.
According to LendingTree data, the average APR offered with a new credit card is 22.91%, as of December 2022:
Credit cards carry different fees such as an annual fee, over-the-limit-fee, late payment penalty, finance charge, foreign transaction fees, etc. The credit card issuer may also charge additional fees for issuing a new credit card, or an additional credit card apart from the one you are currently using.
Some of these credit card fees may be avoided by making timely payments and spending within the allowed limit. Check your credit card agreement for all fees applied to the card.
The grace period refers to the number of days that the cardholder has to pay any outstanding balance on the card without incurring any finance charge.
If your credit card does not allow a grace period, it means that a finance charge or interest starts accruing immediately. Compare the grace period allowed across multiple cards, and pick the card with a sufficient grace period.
Credit card issuers may offer gifts, reward points, and services that cardholders can enjoy as they use the card. Credit cardholders accumulate points as they use their cards to pay for everyday purchases.
Depending on the reward program, the points can be redeemed into gift cards, airline miles and statement credits. Check the rewards that each credit card offers and how they can be used.
If you want to pick the best card for your needs, you need to narrow down your search to a few select factors. Here are important factors you can consider to find the ideal card for your needs:
Credit card issuers generally require borrowers to have a good credit score to get approved for credit. A higher credit score will help you qualify for credit cards with favorable terms.
However, if your credit score is not within the expected level, you should examine your credit report to determine the cause. Start by paying delinquent payments and ensure on-time payments on all monthly bills.
Each credit card offers different rewards and perks, and you should figure out the benefits that you need the most. For example, if you are a traveler, you can get a credit card that offers travel accident insurance, coverage for lost baggage, airport lounge membership, trip cancellation insurance, and purchase protection to cover damaged or stolen goods. Credit cards offer plenty of perks, and you should decide the specific benefits you need, and pick the card that satisfies those needs.
Before picking a credit card, make sure you are comfortable paying the associated credit card fees. For example, some cards charge an annual fee of up to $500 or higher, which may be too expensive for some cardholders. Still, cards that charge an annual fee may offer various benefits such as sign-up bonuses, elite hotel status, annual travel credits, etc. that cover up for the annual cost. Compare associated credit card fees for different types of credit cards, and decide the card that you are most comfortable with.
Once you have a list of credit cards that you are interested in, you should calculate the benefits of each card based on your average spending and what you stand to gain. When comparing the benefits, narrow down to the cards with the highest perks and cardholder benefits. If the credit card has an annual fee, compare the value of the perks and bonuses you get to determine if it is worth it.
The JD Power US credit card satisfaction study ranked national issuers higher than regional issuers in customer satisfaction scores. In the national issuer’s category, American Express ranks highest with a score of 838, followed by Discover with a score of 837 and Bank of America in third place with a score of 812.
Regions Bank ranks highest among regional banks with a score of 816, followed by BB&T (Truist) and PNC in second place with a score of 815. When assessing customer satisfaction, JD Power assessed six key factors including interaction, communication, rewards, key moments and credit card terms.
The study found that there was a decline in credit card satisfaction since the COVID-19 pandemic hit. Although credit card issuers were on track to achieve a new high in customer satisfaction, the trajectory changed when the pandemic started.
This decline in credit card customer satisfaction was unique to the credit card industry, with other financial services such as retail banking and primary mortgages recoding improved customer satisfaction.
The affluent market segment recorded the sharpest decline in customer satisfaction, with the satisfaction scores falling 14 points since the start of the pandemic. Credit card issuers can address the declining customer satisfaction through proactive customer outreach to address emerging issues, respond to customer queries, and discuss how to support cardholders during the pandemic.
Before taking a credit card, you should first check the issuer’s rating on Trust Pilot and BBB rating. To check a credit card provider on Trust Pilot, go to Trustpilot.com, and search the business name in the search box. If the business is listed on Trust Pilot, the search will return the business profile of the provider.
Click the business name of the credit card issuer to view its profile and recent ratings and reviews. Scroll through the ratings to see what verified customers say about the provider and if the complaints are resolved.
You can also check the credit card provider’s ratings on bbb.org. You can search the provider by its business name, website, email or phone number. If the business is listed on the website, the search will return the business profile, with a link to the reviews and complaints.
Click to view the business profile, and scroll through the ratings to get an overview of what other customers think about the business. A lender with a BBB rating of A or A+ gains public trust and confidence.
Why it’s Important?
Consumers trust businesses that are Trust Pilot and BBB accredited since it acts as a vote of confidence in the business. Businesses also benefit from dispute resolution and inquiry services, where aggrieved customers can file complaints, and allow businesses to address and solve complaints amicably. Potential borrowers can review credit card issuers to determine if they have unresolved complaints that may paint them in a bad light.
With the different types of credit cards on the market, it takes time to uncover the pros and cons of each card, and the cost savings you will get by picking a specific card. Here is what you can do to know more about your cards:
With multiple credit card options to consider, you should compare credit cards to determine the best possible offer. If you have bad credit, you can choose a secured credit card to help you build credit as you borrow. Alternatively, if you want to consolidate your credit card debts, you should go for a balance transfer card that offers a 0% introductory fee. Also, consider the applicable fees for each credit card, by looking at the annual fee, foreign transaction cost, late-payment fee, etc. Compare several cards, and pick one with the highest cost savings.
Credit cards offer different reward programs, and it is important to understand where you spend your money the most and get a card that gives you rewards such as cash backs and discounts. If you travel a lot, you can get a credit card that gives you travel benefits such as lost luggage protection, trip cancellation protection, and car rental insurance. You can also redeem the rewards for cash and gift cards that can be used in participating online retailers.
When applying for a credit card, lenders use your credit score as one of the factors to determine your creditworthiness. Borrowers with a credit score below 580 are considered high-risk, and this makes it difficult to qualify for a credit card. Bad credit may be due to one or more missed payments, late payments, delinquent accounts, filing for bankruptcy, or a history of foreclosures.
If you have bad credit, you can apply for a secured credit card as a way to access credit and improve your credit score at the same time. A secured credit card requires cardholders to pay a deposit of a certain amount into a savings account, and the credit limit is calculated as a percentage of the deposit. The deposit also acts as collateral for the loan, and it is not used when using the cash to make payments. For example, a credit card issuer may require a deposit of $300, and set a credit limit equivalent to 80% of the deposit. As you make on-time payments on the card, you also build your credit line. A secured credit card can also be converted into an unsecured card if your credit status remains in good standing without missed or late payments over a period of time.
Credit card issuers have a set of requirements that they consider when reviewing credit card applications. Knowing what the lender requires to approve your application can help you know the possibility of getting the credit card application approved. Here is how to qualify for a credit card:
Credit card issuers require applicants to have a good credit history to approve a credit card application. Although one late payment may not lock you out, some lenders are interested in lending to borrowers with a spotless credit report. Watch out for any errors in your credit report such as paid up loans that have not been updated, and which may prevent you from qualifying for a credit card.
If you have limited or no credit history, you are less likely to get approved for a premium credit card. You can apply for a secured credit card to help you improve your credit score. When applying for secured credit card, lenders require you to make a security deposit of at least $250 or higher before you can be approved. The security deposit may be equal to the approved credit limit.
If you have bad credit or limited credit history, you can ask a friend or colleague to co-sign your credit card application. The co-signer must have a higher credit score, and meet the required criteria for credit card approval. The co-signer takes a risk by agreeing to co-sign your application, and is responsible in the event that you fail to make payments on time.
Every time you use your credit card to make a payment, the amount deducted from your card is added to the current credit card balance. If you spend beyond your credit limit, the issuer automatically charges an over-limit fee, which can affect your credit score. Before swiping your credit card to pay for purchases, it is important to know your credit limit and the available credit amount that is available to spend.
This chart created with Experian data, highlights the significant increase in the average credit card limits in the last decade. Credit card limits have consistently increased with an overall increase in the recent 10 years.
Start by logging into your credit card account to see the approved limit. Most issuers show the available credit on the account dashboard. The dashboard is updated immediately a new transaction is made. If you have not signed up on your issuer’s website, you can create an online account to track your credit card transactions. You can also check your credit limit by requesting your credit card’s billing statement. The billing statement shows all transactions conducted within the billing period, the credit limit, current outstanding balance, and the available credit.
The credit limit is the highest amount of money that issuers allow cardholders to borrow using their credit cards. Issuers use different methods to determine the credit limit for cardholders. Examples of factors that lenders consider include your credit scores, payment history, income, etc. Knowing what your lender is looking for can help increase the chances of getting approved for a higher credit limit.
One of the things that issuers consider is your ability to pay. Your past payment history can give issuers insights into your ability to pay by checking your history of paying bills and debts. Issuers also consider your credit history to determine your credit limit. The issuer can also assess your ability to pay by looking at your income and expenses. If your expenses and debts take a huge portion of your monthly income, a credit card issuer will be hesitant to approve a higher credit limit. For example, if your monthly income is $5000, and the expenses amount to $4500, it will be impossible for the lender to give you a credit limit of $10,000.
If you are using a secured credit card, you can control the credit limit for your card. Usually, credit card issuers require cardholders to make a security deposit to the credit card, and the credit limit is based on the amount of deposit. For example, a security deposit of $2000 qualifies you for a credit limit of up to $2000. The security deposit can be as low as $250, and go as high as $10,000. Credit card issuers hold the deposit as collateral for the account, and cardholders cannot access these funds when the card is active.
Understanding what credit card issuers are looking for can help you become more confident and increase your chances of getting approved. Check the following things before applying for a credit card:
When applying for a new credit card, your credit status plays a key role in determining whether or not your application will be approved. Request a copy of your credit report to know where your credit stands. Also check for any errors and inaccurate entries on your report.
The presence of errors such as wrong or inaccurate entries may affect your credit score, and diminish your chances of getting a credit card. If you have identified errors on your credit report, you should file a dispute with the credit bureau that produced the report, to have the error modified or removed. Generally, credit bureaus have 30 days from the date of your dispute to make a decision.
Applying for multiple credit cards within the same period can damage your credit score since these inquiries appear in your credit report. To avoid such scenarios, you can prequalify for several offers to get an idea of the terms that each issuer offers. Although prequalification is not a guarantee that the issuer will approve your application, it can help you narrow down your search to a few offers. Plus, inquiries made during prequalification do not affect your credit score.
If you are shopping for a new credit card online, you have probably found lenders that allow you to prequalify for a credit card. But can prequalification affect your credit score? The answer is “no”.
When you prequalify for a credit card, the lender performs a soft inquiry to assess your creditworthiness and your level of risk. A soft inquiry is part of the background check of online lenders, and it is not considered when calculating credit scores. Prequalifying for a credit card helps you know the loan terms of each lender before applying for a credit card. Although prequalification does not guarantee approval, it can help you compare offers from several lenders before you can apply for a card.
Before applying for an extra credit card, you should consider your credit situation, and the impact that the card will have on your credit status.
Applying for another card can have a temporary negative effect on your credit score, and it important to evaluate your financial and credit situation before applying for a new card. If the situation allows you to get a new credit card, you should go back to the drawing board to compare the best credit cards for your specific needs.
Signs it is time to look for a new credit card
If you have an excellent credit score, you can get a second credit card without hurting your credit scores to a large extent. However, with a bad credit, you should find ways of boosting your credit scores first before taking a second credit card. As the credit score improves, you can apply a second credit card with better features than your first credit card. For example, a card with a low-interest rate, zero annual fees, higher credit limit, and rewards such as cash backs and discounts would make a better deal for a second credit card.
If the current issuer is not willing to negotiate a lower interest rate, you can get a new credit card with a lower rate. Some credit cards offer a 0% APR for the first 12 to 18 months, and you can save money by moving your balances to the new card. A new card with a 0% APR will help you pay part of the outstanding balance interest free. Remember to check the interest rate charged on the new card after the 0% APR offer period has ended.
According to Experian Data, the average, Americans hold an average of 3.84 credit card:
While a new credit card would make sense when your credit score has improved, there are circumstances when you should wait before applying for a new credit card.
Signs it not a time for a new card:
If you have bad credit, a new credit would make your credit standing even worse. The chances of getting approved for a second credit card are low, especially when you have a poor credit score. Every time a credit card application is rejected, it leaves a hard inquiry on your credit report, which may be interpreted as a sign that you are a risky borrower.
If you are planning to apply for a home loan or mortgage in the coming months, it is a bad idea to apply for a new credit card. A slight drop in your credit score can make it difficult to get approved for a loan, especially if your credit score is on the edge.
Once you are approved for a new credit card, it can take an average of 5 to 10 days to get your new card. The credit card shipping duration varies across the different credit card issuers. If you can’t wait for 10 days to receive your card, talk to the card issuer to see if they offer fast shipping. If you choose expedited shipping, the issuer may charge a shipping fee to facilitate quick delivery.
However, if your card has not arrived within the expected delivery period, you should contact the credit card company to know why the shipping delayed. Sometimes, the approval may be delayed for further review. When this happens, you should call the credit card company to know the information required to approve the card. The issuer may require you to verify your identity or provide additional documents that prove your income or physical address.
The credit cards industry is one of the sectors that have taken a hit since the COVID-19 pandemic started. A Federal Reserve report published in August 2020 revealed that credit card debt declined by $2 billion between May and July 2020.
Although consumers have reduced their spending habits, credit card issuers have also taken steps to protect themselves by controlling the outstanding balances from their customers. Issuers now require higher credit scores for new credit card applications due to the strained economic conditions, and the potential bankruptcy of cardholders who have lost employment or closed down their businesses.
One of the factors that have contributed to a drop in credit card debt is the decline in purchasing and spending opportunities. When the COVID-19 crisis hit, a majority of businesses such as restaurants, bars, cinemas, and coffee shops closed down, consumers did not have many places to use their credit cards.
Also, with the suspension of airline travel, there was a direct impact on consumer spending for consumers who use their cards to buy airline tickets, pay hotel accommodation and dining expenses, and other travel expenses. The uncertainty about the future has also made consumers more careful with their spending, by choosing to cut on unnecessary purchases and borrowing.
Debt consolidation involves taking multiple debts and combining them into one debt with a single. The new debt has favorable terms compared to the previous debts. With a lower interest rate, you save money on interest, and you can pay the debt sooner. Depending on the amount of debt and your credit score, you can use your credit card to consolidate your debt.
The best credit card for debt consolidation is a balance transfer credit card. Some balance transfer cards come with a 0% introductory APR period for a period of 6 to 18 months. If you pay your debt within the introductory period, you will not pay interest on the transferred balance. However, if you don’t pay the debt within the introductory period, any outstanding balance will be charged interest at the cards prevailing interest rate. Some issuers may also charge a transfer fee of 3% to 5% on the transfer amount. Before choosing a balance transfer credit card, you should calculate the transfer fee and the new interest rate to determine if this option saves you money.