With so many credit card options out there, it may be hard to choose a new one. There are many options available. One person may want rewards (cash back, points, or miles), while another could be motivated by a 0% introductory interest rate or an offer of no annual fee.
When deciding on a new credit card that is best for you, it boils down to two basic questions: What do you want from a card? And how strong is your financial history?
Here’s a glance at the credit card options available and provisos to consider.
Key Points
• Deciding which credit card is right for you can involve considering the features and rewards you want as well as your credit profile.
• Rewards cards can offer bonuses in a variety of forms, such as cash back, points, or miles.
• Balance transfer and low introductory rate credit cards can offer relief from high interest rates.
• Secured and prepaid cards may be good options for those with credit scores that fall below the good range.
• Applying for a credit card typically involves a hard credit inquiry which will temporarily lower your credit score by up to several points.
Rewards Credit Cards
If you are good about paying off your credit card every month and never incur interest, you might consider a rewards card. These cards may offer sign-up bonuses and give consumers rewards in the form of miles, cash back, or loyalty points.
There are variations on a theme, such as:
• Bonus offer + 0% period for purchases
• A set dollar amount in travel or bonus miles if you meet the initial spending requirements
• Flat-rate cash back
• Customizable rewards
A few cards offer an eye-opening 5% cash back in rotating categories, up to a limit (such as 5% back on the first $2,000 spent, after which all other purchases earn a lower rate of cash back), and you’ll usually have to manually activate the offer each quarter.
But you can often lessen the work involved and earn more in total cashback rewards with a flat-rate cashback credit card, when all purchases earn the same amount.
Frequent travelers lured by premium travel rewards cards will want to weigh the perks against an annual fee of several hundred dollars.
New reward offerings have bubbled up, such as allowing cardholders to put cash back toward loan or rent payments.
When choosing a rewards card, think about your spending habits and redemption preferences, be aware of your credit score (these cards usually require a good score), and pay off your balance each month — rewards cards typically have higher APRs (or annual percentage rates) than balance transfer cards.
If you fall behind on payments or carry over balances, all the perks and rewards are unlikely to be worth it.
Recommended: What Is a Charge Card?
Cards for Those With Limited or Damaged Credit
For college students with little or no credit history, there are student credit cards.
If you don’t have great credit, there are also secured credit cards. Generally, they require a deposit from the user. A secured credit card functions like a normal credit card except that it has a backstop: The user puts up an amount of money that the issuer will then use if the cardholder defaults.
The lender offers a certain amount of credit based on the promise that the user will pay off the balance in full every month.
If your account is upgraded to an unsecured account, thanks to good habits, or is closed in good standing, your deposit is returned.
Both of these options can help someone build credit and could lead to a card with more perks if the holder is diligent about paying off the balance every month.
Prepaid Debit Cards
A secured credit card is primarily intended for building credit, whereas a prepaid debit card is good for budgeting and convenience but does not affect your credit.
A prepaid debit card is preloaded with your own money, typically through direct deposit, cash or check deposits, or online transfers from a checking account.
The card is used for transactions until the money runs out. Since there is no line of credit, you cannot run up debt on the card.
This is a great option for a young person who needs to learn how money works or for adults with a bad credit history, though it will not positively impact their credit scores.
Credit Cards That Save You Money on Interest
If you’re prone to carry a balance month to month, you might want to consider a low-interest card. While these types of credit cards don’t come with bells and whistles like airport lounge access, it is the financially prudent option if you have an irregular income or you carry a balance each month.
It might be best to look for a card that offers an initial APR of 0% and then an ongoing low interest rate.
Keep in mind that low-interest credit cards usually require a good credit score to qualify. Generally, the better your credit score, the lower your interest rate. The lowest advertised APR isn’t always what an applicant gets.
Recommended: Does Applying for a Credit Card Hurt Your Credit Score?
Balance Transfer Credit Cards
If you are in credit card debt, a balance transfer credit card could help you pay off your debt at a lower interest rate.
Interest rates and terms vary widely with balance transfer credit cards. A balance transfer card will often come with a 0% APR introductory period, but once that ends, the interest rate shoots up.
It’s important to pay attention to the fine print if this is an option you’re considering.
Recommended: Tips for Using a Credit Card Responsibly
The Takeaway
Choosing the most rewarding and suitable new credit card can become a research project. To narrow down your options, it’s best to think about your spending habits, needs, credit history, APR, any annual fee, and perks. Then you can find the right fit for your needs.
Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.
FAQ
What are the different types of credit cards?
There are many different kinds of credit cards available. These can include secured and unsecured cards; premium, travel rewards, and cash back cards; and balance transfer options. It’s wise to think about what benefits are most important to you and which cards your credit history will qualify you for.
What is a platinum credit card?
A platinum credit card is a premium product, generally considered a step up from a standard or gold card. It usually offers higher credit limits and more perks, but there may be higher annual fees and interest rates as well.
What are the 4 major credit card networks?
The most common credit card networks are Visa, Mastercard, American Express, and Discover. Note that these can be different from your card issuer, which might include such banks as Citi, Bank of America, Capital One, and Chase.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
This content is provided for informational and educational purposes only and should not be construed as financial advice.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .
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