How We Picked The Best Credit Cards and Why You Can Trust The Analysis
The ValuePenguin editorial team combed through over 300 credit card offers in search of the best ones. Our approach is based on the core concept that there is no one-size-fits-all credit card. You are likely to have very different spending habits or different financial situations than other people visiting this page. Our selection of the best credit cards reflects that understanding. We built models and ran simulations for a variety of profiles, and tested how the 300+ credit cards we examined performed under various stress tests. We considered things like rewards rates, sign-up bonuses, continuing bonuses, airport lounge access benefits, interest rates, transaction fees and more.
In the end, we used all these factors to break out the top performing cards into 12 broad categories that will encompass most of what our audience looks for. Recognizing the fact that we may still not provide the right answer for every single visitor, our comparison tool above can provide a more personalized answer to our visitors.
The ValuePenguin credit card experts have been covering the card industry for over three years. We closely follow new developments, deals, consumer complaints and major industry trends. In short, we live and breathe credit cards. When we put out a list of credit card picks, they have been thoroughly vetted, debated, and tested.
How To Find The Best Rewards Credit Card
Those people who want to consider more offers than the ones we've listed above, below you'll find the considerations you need to go through to find the best credit card. This guide provides a framework for evaluating credit cards and how to approach them with the same critical eye as any analyst.
Your financial profile matters
People shopping the "best credit card" often want a simple answer to their question. Unfortunately, no one can provide you with a quick and simple answer because what's considered "best" depends on a great number of factors. Having said that, we think typical consumers will find the Chase Sapphire Preferred® Card or the Citi Double Cash Card to yield the great rewards for optimizers and satisficers. Your personal spending habits are key. Do you spend a little or a lot? Do you want to use your new card to predominantly pay for gas and groceries or travel and dining out? There are a ton of possible needs someone is hoping to address with their card. All of these then have additional considerations, such as whether the person searching tends to carry a balance on their card, what their FICO score is and more. One answer can greatly influence the number of options available to you. To help narrow down your search, we broke down the most fundamental questions you need to ask yourself and why they matter.
Do You Keep A Balance On Your Credit Card? This is the very first thing anyone shopping for a credit card needs to consider. Even though rewards can be flashy and attractive, they may not matter in the face of high interest rates. Credit cards, more so than any other loan product, tend to come with high APRs. Therefore, you need to consider your likelihood to carry a balance on your card. If you are the type of person to always pay off their credit cards in full every month, then ignore APR completely. It shouldn't influence your decision. However, if you do carry a balance, it is virtually all you should be concerned with. Lowering your APR will almost always trump any rewards you can earn. It doesn't matter how much cash back you earn. If you end up paying 25% on your debt, you are almost always guaranteed to walk away with a net negative.
If shopping for a rewards card, consider the whole picture. When evaluating a credit card offer, you need to a holistic view. You may read something like "5 points per dollar on dining". This may, at first, sound very exciting. However, you need to consider a few things. What are those points worth? Just because one card awards 5 points while another gives 2, it’s not always an apples to apples comparison. Unless they are part of the same rewards program, the answer is almost certainly "no". Secondly, are you actually likely to use the reward points? Americans earn millions of frequent flyer and reward points every year. Few of those are actually redeemed. Make sure you are investing in a reward program you are likely to use.
Is there a minimum amount of points required to redeem your rewards? This one is especially important for low spenders. Some credit cards require you to rack up thousands of points before you can trade them in for a prize or cash back. If you are someone who rarely uses their credit card, this may mean you're unable to use your points for a long time. This kind of system is doubly problematic if the points/miles can expire. Make sure to carefully read through the terms and conditions looking for this point before you apply.
How much will I spend on my new card? Cards with the best rewards rates typically come with an annual fee. Does that mean you should disqualify them from consideration? No. The answer as to whether such a card is good for you will come down to how much you spend. Some people can spend so much that the difference in rewards rate actually makes up for the annual fee deficit. You need to figure out whether paying the extra fee each year justifies the bump in rewards.
Narrow your search by identifying the type of credit card you need
As you search through offers online, you will almost certainly always see them categorized in one of several ways -- low interest, cash back, miles, rewards, balance transfer, etc. Understanding what type of credit card is best for you can go a long way in helping your search. Therefore, narrowing the pool of cards you look at can greatly reduce the time you have to spend looking.
Take A Look At How The Rewards Work: The difference between cash back, miles and points often comes down to taste. While cash back cards tend to generally offer smaller returns, they are the most flexible to use. You don't have to worry about redeeming them with one particular brand. Airline miles are on the other end of the spectrum. You can typically only use them to book a flight. However, in return you are getting more value per dollar spent.
Rewards Rate: One easy way to compare the three reward card types to each other is to reduce their rewards down to what's called a "rewards rate". This is the percent value you get back for each dollar spent using the card. For example a card offering 2% cash back has a 2% rewards rate. If you have a card that gives you 1 mile per dollar spent anywhere, and those miles are worth $0.02 each, the card is also said to have a rewards rate of 2% (1 x $0.02 = $0.02). We preformed a study of credit card rewards available on the market. You can see a plot of min/max rewards rates across several card categories. Generally, you should aim to get no less than 1.5% to 2% back on each purchase.
Low interest vs Balance Transfer: You should look for balance transfer credit cards only if you are looking to help pay down existing credit card debt. Low interest credit cards, on the other hand, are best for people who are planning to make big purchases in the future that which will need financing. Luckily, you can find plenty of credit cards that are hybrids, offering 0% introductory APR periods on both balance transfers and future purchases.
by Robert Harrow
* See the online credit card application for details about terms and conditions. Reasonable efforts are made to maintain accurate information. However all credit card information is presented without warranty. When you click on the "Apply Now" button, you can review the credit card terms and conditions on the issuer's website.
Disclaimer: This content is not provided or commissioned by the credit card issuer. Opinions expressed here are author's alone, not those of the credit card issuer, and have not been reviewed, approved or otherwise endorsed by the credit card issuer. This site may be compensated through the credit card issuer Affiliate Program.
These responses are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser's responsibility to ensure all posts and/or questions are answered.
How We Calculate Rewards: ValuePenguin calculates the value of rewards by estimating the dollar value of any points, miles or bonuses earned using the card less any associated annual fees. These estimates here are ValuePenguin's alone, not those of the card issuer, and have not been reviewed, approved or otherwise endorsed by the credit card issuer.