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How to shop for credit cards
Are you in the market for a new credit card? Whether you’re shopping for your first or fifth card, it’s easy to make a mistake when choosing which one to apply for.
What type of card do you want? What can you realistically get approved for? Should you consider a secured credit card? Which credit card issuers offer the best options for your needs?
Those are just a few basic questions you’ll need to ask yourself when shopping for a new card. So with hundreds of options to choose from, how do you know which card is right for you? This complete guide to personal credit cards will steer you in the right direction so you can be confident in your final decision.
Here is what you need to know when shopping for a new credit card.
Personal credit card basics
Personal credit cards are a form of revolving credit that you can use for just about any purchase. They have a credit limit and you can make purchases with the card up to that limit.
Each month, the credit card issuer will provide you with a monthly statement noting your new balance and minimum payment due.
Your minimum monthly payment will depend on how much you owe. It’s commonly a fixed amount of about $20 to $25 or 1% to 3% of your account balance, including interest and fees.
Why you shouldn’t carry a credit card balance
Personal credit cards often charge double-digit interest rates. So make sure you pay off your balance in full each month to dodge the extra cost. If you’ve already built up a bigger balance than you can pay off all at once, stop using the card and pay as much as you can each month till you’ve paid it off.
If paying your balance off every month isn’t how you’ve been using your credit, you’re not unusual. According to Lending Tree, as of 2021:
- 51% of credit card accounts carry a balance,
- the average for cardholders with outstanding balances is $6,569, and
- the average credit card APR (annual percentage rate) is 14.54%.
What’s more, estimates of average household credit card debt put the 2021 figure at $8,000 or higher. In an idealized world without compounding, carrying $8,000 in debt for a year at a 14.54% APR would cost you $1,163.20. So the average household ends up paying a lot more than it realizes for the products and services its buys every year.
If you want to achieve financial good health, you don’t want to be average in how you use your credit cards. It’s important to use personal credit cards responsibly to avoid high-interest debt.
By the way, in case you’re curious, Federal Reserve stats show that Americans had $800 billion in credit card debt in the third quarter of 2021. That accounted for the bulk of their $1.01 trillion in revolving debt.
Fixed vs. variable interest rates
A fixed interest rate will remain the same throughout the life of your credit card. However, fixed-rate cards are rare these days due to the Credit CARD Act of 2009.
Most cards come with variable interest rates, meaning your rate will change over time based on a financial index (usually the prime rate).
The prime rate is based on rates of the largest banks in the U.S. It’s typically a few percentage points higher than the federal funds rate set by the Federal Reserve.
Issuers vs. networks
A credit card will have an issuer and a network. You should know how these differ. Here are the basics:
- Issuer. You’ll get your credit card from a bank or credit union, otherwise known as the “issuer.” You’re borrowing money from the issuer every time you swipe your card. Examples of issuers include Chase, Bank of America, Capital One, and Citibank.
- Network. The logo you often see on credit cards is the company — otherwise known as the “network” — that processes card transactions. The largest U.S. card networks are Mastercard, Visa, Discover, and American Express.
Credit score basics
One of the best ways to ensure you qualify for that new card you want is to make sure you use any credit you already have wisely. Here are some things you should keep in mind.
Why your credit score matters
Your credit score plays a big role in the credit card approval process. You’ll qualify for different cards based on your score.
Lenders only want to work with borrowers who can and will pay them back. So they’ll factor in your credit score when determining your trustworthiness as a borrower.
The credit score lenders most often look at is your FICO score. Based on your numerical FICO score, you’ll fall into one of four credit-worthiness categories:
- Excellent — 720 to 850.
- Good — 680 to 719.
- Fair — 620 to 679.
- Poor — 300 to 619.
The higher your score, the better your chances are of getting approved for the card you want.
As a guideline, here are the average credit limits people get by credit score:
- 780 to 850 (high excellent range): $10,400.
- 660 to 779 (fair to low excellent): $5,700.
- 500 to 600 (higher poor range): $2,570.
The table below shows the average credit card debt and credit limits from 2008 to 2021.
Card issuers offer cards designed for different credit score ranges. For example, one may offer a premium card for people with credit scores between 700 and 850, and a starter card for people with credit scores between 300 and 650 who want to build their credit.
If you apply for a card with credit score requirements below your score, you may miss out on premium benefits. However, if you apply for a card with a range too high, you may not qualify and it could ding your credit score further. The filter function here allows you to see all of the cards designed for your credit score, helping ensure you don’t apply for the wrong card.
Since your credit score is so important, it pays to know what factors affect that score. Here’s an overview.
Your payment history makes up 35% of your credit score. Pay on time and your score will increase. Pay late and your score will drop.
Amount of debt
30% of your score is based on the amount of debt you owe compared to how much total credit you have available to you (the total of the credit limits on your open revolving accounts). This is called your credit utilization ratio.
If you let your credit utilization ratio get to 30% or above, your credit score will take a hit. The best thing for your credit score is to use much less credit than you have available. The best way to do this, and the best thing for your financial health overall, is to pay off your balances in full every month.
Length of credit history and age of accounts
Your length of credit history makes up 15% of your score.
A short credit history makes it hard for lenders to assess a borrower’s reliability. So the longer your credit history is, the better. A long history gives lenders better insight into what kind of borrower you are.
When assigning you a score based on the length of your credit history, credit agencies also consider the average age of your open accounts. When you get a new credit card, it will lower the average age of your accounts. This, in turn, will cause your credit score to drop.
So, once you’ve been approved for a credit card, keep the account open. The longer you keep it open, the better.
10% of your score is based on new credit.
New credit increases the chance that you will miss a monthly payment. So lenders don’t like to see borrowers take on too much new debt. Taking on a lot of new debt suggests that you’re strapped for cash and might struggle to keep up with payments.
Your score will drop slightly when you open a new credit card account. But you’ll be able to recoup the points quickly.
The remaining 10% of your score is based on your credit mix.
Lenders will see you as a reliable borrower if you’re capable of managing multiple sources of debt, such as a student loan, a mortgage, and a credit card.
If you already have other loans, you could boost your credit score by adding a credit card.
The different types of personal credit cards
Credit card issuers offer several types of credit cards to match every type of consumer. What type of credit card is right for you depends on your situation. Rewards credit cards, for example, are a great option for anyone looking to earn perks with every purchase.
The table below shows what credit card features are most attractive to most consumers. Are these the same factors that matter most to you?
Whatever features matter most to you, there is probably a type of card you’ll prefer over others. Here’s a quick summary of the major types of personal credit cards.
|Card type||Card purpose||Examples||Ideal for…|
|Cash-back credit cards||Earn cash rebates on purchases||Cards with high rates on everyday purchases, such as gas, groceries, and restaurants||Regular consumers|
|Rewards cards||Earn miles and travel perks||Cards with sign-up bonuses, miles, and more||Travelers and higher credit scores|
|Credit building/repair cards||Help build or rebuild your credit||Secured, and bad credit cards||People with bad credit or no credit|
|Low-interest credit cards||Minimize interest when carrying a balance||Balance transfer credit cards||Specific types of users|
Cash-back credit cards
These cards offer cash-back rewards when you use them to make purchases. You typically receive your cash back in the form of a statement credit, paper check, direct deposit to your bank account, or gift card.
The different types of cash-back credit cards are:
- Flat-rate cards. These cards offer a flat rewards rate on all of your purchases.
- Tiered-rate cards. These cards offer bonus rewards on certain spending categories.
- Rotating rewards cards. These cards offer bonus rewards on certain spending categories that change every few months.
Some cash-back credit cards offer a small sign-up bonus worth between $100 and $200. Most cash-back credit cards don’t charge an annual fee, but some do.
Travel rewards credit cards
Instead of offering cash back, travel credit cards offer points or miles that make it easier to afford your next vacation.
Many also offer special travel perks such as priority boarding with your favorite airline, elite status with your go-to hotel chain, or various types of travel insurance.
The three main types of travel credit cards are:
- General travel cards. These cards offer rewards you can use to book most forms of travel.
- Airline cards. These cards offer rewards and perks that you can use with a specific airline.
- Hotel cards. These cards offer rewards and perks that you can use with a specific hotel brand.
Travel credit cards often offer large signup bonuses. Not all travel cards charge an annual fee. But some of them charge hundreds of dollars. So be careful when comparing your options.
Low-interest credit cards
Do you need to finance a large purchase, transfer a balance, or carry a balance from month to month? If so, it might be a good idea to get a low-interest credit card.
The two main types of low-interest credit cards are:
- Balance transfer and 0% APR cards. These cards offer a 0% introductory APR on new purchases for a set period.
- Low ongoing APR cards. These cards don’t offer a promotional APR upfront, but they do offer a low (often single-digit) interest rate.
Some low-interest credit cards also offer cash back or travel rewards, but not all. So it’s important to consider your priorities when comparing these cards. Low-interest cards typically don’t charge annual fees.
Secured credit cards
If you’re new to credit or need help rebuilding your credit, consider getting a secured credit card. A security deposit is required to open the card, but it’s typically easy to get approved.
Your credit limit is based on the amount you deposit. This refundable deposit acts as collateral to enable banks to lend to you without risk to them.
If you reach your limit and don’t pay back your debt, the issuer will take the cash you deposited. Aside from that, secured credit cards function like other credit cards.
You can use a secured credit card to build or rebuild your credit. Just make sure the provider you choose reports your payments to the three major credit bureaus.
Secured credit cards may charge an annual fee, but some of the best don’t. You may even get rewards and may get the security deposit back before you close the account.
Store credit cards
Most major retailers offer a store credit card that you can either use exclusively at that retailer or use everywhere. These cards often provide cardholders with bonus rewards and perks for using the card at the store.
Because some retailers don’t allow you to use their card anywhere else, these cards can be limiting. However, they’re generally more willing to approve people with a thin credit profile or a poor credit score.
Store credit cards typically don’t charge annual fees.
Check out our list of 255 retail stores that offer credit cards.
Student credit cards
These cards typically offer rewards and other incentives designed specifically for college students. Some even encourage students to learn how to use credit responsibly or reward students for good grades.
Student credit cards usually don’t offer sign-up bonuses, but they don’t charge annual fees either. Some of the top student cards offer travel rewards or cash back for purchases.
Charge cards are rare. American Express is the only major U.S. credit card provider that offers them. They differ from other credit cards in that you’re required to pay your balance in full each month.
Because of this requirement, there’s no interest rate or “minimum payment” on a charge card. Late payments can result in fees and additional penalties depending on the card’s terms.
Since there is no predetermined credit limit, purchases are approved based on spending, payment, and credit history.
If you can get approved, the American Express Gold Card and Platinum Card are worth looking into. American Express charge cards offer travel rewards, but they do come with high annual fees, so be careful.
What if I have a low income?
If you have a low income, you may still qualify for a credit card with a low credit limit. It might even be called a “low-income credit card.” Even if your income isn’t that low, you may prefer a lower-limit card if you’re in the habit of overspending.
To qualify for a card with a $500 credit limit, you generally need an annual income of at least $15,000. If your income is lower than that, you might still qualify for a special-use credit card like CareCredit.
There are also some personal loan options for borrowers with lower incomes.
Common personal credit card benefits
In addition to offering rewards, many credit cards offer additional benefits. These include:
- Fraud protection. If someone steals your credit card and makes a purchase, you’re not liable for it.
- Price protection. If you purchase an item and the price drops within 60 to 90 days, you can request a reimbursement for the price difference.
- Purchase protection. If an item you purchase gets damaged or stolen within a few months, you could get reimbursed for the amount you paid to get a replacement.
- Return protection. If a store won’t take your item back, you may be able to send it to the credit card company and get your money back.
- Extended warranty. If you purchased an item with a warranty of a year or longer, your credit card will generally add a year or two to that warranty.
- Rental car insurance. Most credit cards offer insurance to cover damage to a rental car. The insurance is usually secondary, however, which means it kicks in after your personal car insurance policy.
Other credit cards, especially travel credit cards, add even more benefits, such as various types of travel insurance and protections.
How to pick the right personal credit card
There’s no single card out there that’s best for everyone. So it’s important to do some research to make sure you get the right one for you. Here are three steps to get it right.
1. Check your credit
Different credit cards are targeted toward different borrowers. For example, the best rewards credit cards and cards that offer 0% APRs typically require good to excellent credit, which starts with a FICO credit score of 670.
However, there are secured credit cards and cards for fair credit if your score is lower. The important thing is that you apply for a card that fits your credit score. Otherwise, you could get denied.
2. Review your spending habits
Some credit cards offer bonus rewards on specific purchases. So if you spend a lot on groceries, get a personal credit card that offers bonus rewards on groceries.
The same goes for other purchases, such as gas, eating out, and travel. If your expenses are all over the place, consider getting a card that offers a high rewards rate on all your purchases.
If you don’t need a rewards credit card, move on to the next step.
3. Consider your needs
Go back and reread the descriptions of the different types of credit cards above and consider which one suits your needs the best.
Be honest with yourself. If you really need a 0% APR credit card, focus on the 0% APR instead of the rewards that some of the other cards offer.
It’s easy to be tempted by credit cards promotions that could end up costing you more in fees than you get from the promotion.
Pros and cons of applying for and using personal credit cards
Personal credit cards can offer a lot of value to consumers, but they're not a great fit for everyone. Here are some things you should consider about credit cards before you apply for one. Compare the pros and cons to make a better decision.
- They can help you build credit.
- You can earn rewards and get other benefits.
- You can avoid paying interest by paying off your balance in full each month.
- They offer fraud protection and other benefits.
- They're more convenient to use than cash.
- They tend to charge higher interest rates than other forms of credit.
- Their minimum payments are designed to keep you in debt.
- A high credit limit could tempt you to overspend.
- Some charge annual and other various fees.
Frequently asked questions
How should I compare credit card rates?
When shopping for credit cards, we usually focus on the purchase annual percentage rate (APR). However, there are four credit card interest rates to check when comparing credit cards.
- Annual percentage rate (APR) for purchases: A percentage rate that is applied monthly to purchase balances to calculate the amount of interest you owe. A range of 13% to 20% covers most current cards.
- Annual percentage rate (APR) for balance transfers: A percentage rate that is applied monthly to balance transfers to calculate the amount of interest you owe. This rate can vary more broadly than the purchase APR, from under 10% to over 20%.
- Annual percentage rate (APR) for cash advances: This rate is applied monthly to cash advances to calculate the amount of interest you owe. This will typically be equal to or higher than the rate for balance transfers. A 24% APR would not be surprising.
- Penalty annual percentage rate (APR): An annualized percentage rate that is applied monthly to balances that become significantly past due. A penalty APR of nearly 30% is common.
Credit card rates have been rising steadily, but they can vary wildly from one card to another. So, it is worth reading the fine print when comparing credit card rates.
It is particularly important to get the details right when you are looking for a 0% APR balance transfer card.
There are two types of 0% APR promotions: pure 0% APR and deferred interest.
- Pure 0% APR: With this promotion, you’ll get a period of no interest, after which the interest rate increases. If you have a remaining balance, interest is assessed on the amount that remains from the original purchase or balance transfer. This type is more common with major credit cards that offer balance transfer promotions.
- Deferred interest: Store cards that offer 0% APR financing often offer this kind of promotion. While there’s a period of no interest, there’s also a set interest rate the card charges if you don’t pay off the purchase in time. The difference is that you’ll be on the hook for interest based on the original purchase amount, not the amount that’s left over.
How should I compare credit card fees?
Credit cards come with a schedule of fees that often include the following:
- Annual fee: Some issuers require a yearly fee to keep the credit card account open. The fees can range from $0 to $500.
- Additional card fee: This is a fee charged for having an extra card linked to the account. Getting an additional card is usually free, but some issuers will charge a discounted annual fee.
- Foreign transaction fee: A fee is charged by some card issuers when transactions are made in a foreign currency. This can range from 0% to 5%.
- Balance transfer fee: Cards usually charge between 3% and 5% of the transfer amount with a minimum fee of $5 to $10.
- Cash advance fee: Most cards charge either a flat fee or a percentage of the cash advance amount, whichever is greater. For example, a typical cash advance fee is the greater of $10 or 5%.
- Returned payment fee: If your payment bounces you typically will have to pay a penalty fee. This fee is capped at $39 if it’s the second returned payment in the last six months and $29 if it’s the first.
- Late payment fee: If you’re late on a payment you can expect to pay up to $39 ($29 if it’s the first time in six months).
Credit card issuers are required to include disclosures with credit card applications which list their rates and fees. Be sure to look at the disclosures when comparing cards to find a card with the most competitive costs. SuperMoney’s credit card company reviews are a great place to compare all the key fees and features in one place.
How should I compare introductory offers?
Credit card issuers often offer introductory promotions to attract new cardholders. You may be able to benefit from these promotions by earning rewards or saving on interest costs. For example, a card may offer a 12-month 0% APR on purchases or balance transfers.
Another type of introductory offer is a bonus where you get a cash kickback ranging from $100 to $300 for spending a minimum amount within the first one to three months of opening the credit card account. Factor these promotions into the overall value of a card, but remember that they are temporary. So they shouldn’t be the only reason you choose a card.
How should I compare credit card fraud protections?
By law, you are responsible for up to $50 of unauthorized charges when your credit card is lost or stolen. However, some issuers offer zero-fraud liability policies so you will not be liable for any amount in that situation. Further, certain issuers offer features for additional protection, such as credit monitoring and the ability to lock or unlock your card from your smartphone. These features can help increase your peace of mind.
How should I compare credit cards’ ease of approval?
Secured credit cards, bad-credit unsecured cards, and retail cards are the easiest types of cards to get. However, secured cards require a deposit. Retail cards and bad-credit unsecured cards don’t require a deposit, but they don’t usually offer much in the way of perks and rewards.
How can I best do all these comparisons?
Now you know what to consider when choosing a personal credit card sifting through the sea of credit card options is not such a challenge.
- Use SuperMoney’s credit card comparison tools to filter out the cards that don’t offer the features that are most important to you.
- Make sure you enter your credit score so you can focus on comparing credit cards for which you have high approval odds.
- Check the annual fees, APRs, and rewards of each card. Make sure you read the small print.
- Once you narrow down the field to a handful of candidates, read all the credit card reviews to see what others think about your top choices. Credit card company reviews also allow you to see if a card has a pattern of credit card company complaints.
- Pick your top three choices and apply online. You can usually find out if you qualify within minutes.
SuperMoney makes it easy to compare a multiple features side-by-side.
The bottom line
Personal credit cards can be beneficial if you use them responsibly, but they can hurt you if you don’t.
If you’re not a disciplined consumer, then borrowing money via credit can be dangerous. A good rule of thumb to is never to carry a balance. Always pay it off before it starts accruing interest.
On this page, you can start comparing personal credit cards side-by-side to find the best offers on the market today. Compare multiple cards to see what kind of interest, fees, rewards, and other benefits they offer.
You may be surprised by the deals you can get.
Your best credit card in 3 steps
If you're interested in getting a credit card, there's no single best card out there for everyone. As such, it's important to do some research to make sure you get the right one for you. Here are three steps to get it right.
- Check your credit
- Consider your spending habits
- Consider your needs
Personal credit cards can be very beneficial if you use them responsibly, but they can hurt you if you don't. Know your limits and tendencies to make the right decision.
Start comparing personal credit cards now. You may be surprised by the deals you can get.