A credit card can be a useful tool or it can be a dangerous weapon. Most of this depends on you — choosing the best credit card in the world won’t help if you spend beyond your means. American adults carry thousands of dollars in average credit card debt. I lived a decade mired in it and I don’t recommend it to anyone. If you’re responsible, however, a credit card can be both convenient and efficient.
In the first part of this series, I noted that I save 1% on my utilities by paying with my cash-back credit card. These are expenditures I’d make anyhow, but the card saves me money. (As a bonus, using the credit card helps with my quest for a paperless personal finance system.) But there are hundreds (thousands?) of different credit cards to choose from. You can compare each card against the average credit card rates, but beyond that how can you tell which is best?
How to choose a credit card?
When readers have asked me for credit card recommendations in the past. I’ve always declined.
First, I’m still not completely convinced that credit cards are a good idea.
Second, I don’t have the resources to judge which cards are best.
I do know, however, that it’s important to choose the right card for your lifestyle:
- If you are someone who revolves a balance credit card debt, focus on cards that offer low-interest rates (especially on balance transfers) — and put a stop to new charges.
- If you pay your balance in full every month, find a cash back credit card with no annual fees and a solid cash rewards program.
- Some credit card users have special needs. If you spend a lot on gas, consider a gas credit card that gives added rewards on auto expenses. If you travel a lot, look for a card with rewards for flights and lodging.
Choosing a credit card
When choosing a credit card, Money magazine recommends you pay special attention to the Schumer Box, a prominent table in every credit card application. In general, it’s important that you understand the different aspects of the credit card application. Look for:
- An annual percentage rate of 11% or less on purchases.
- Low rates on other loans, such as cash advances or balance transfers. (If you’re doing a balance transfer, find a card that offers 0% APR, at least for a year.)
- Reasonable penalty terms. Find the penalty rate (or default rate), and follow the asterisk to see what triggers it.
- Finance charges that are not computed using two-cycle billing. (Two-cycle billing sucks.)
- No annual fee.
Don’t choose a card just because it offers a signup bonus or because it gives you a discount at your favorite store. Read the terms and conditions. Understand the card’s limitations. Remember: your goal is to pick a tool, like a vacuum cleaner. You’re not looking for a one-time bonus, but a long-term relationship you can live with.
The Best Credit Cards Consumer Reports wrote an article about using credit cards sensibly without falling prey to their traps. The folks at CardRatings.com have compiled a list of the best credit cards in the table below, representing their top picks for the best credit card offers on the market today. The CardRatings editor, Curtis Arnold, has also provided his rating for the cards. Below the table, the CardRatings research staff provide their top picks for the best credit card offers by category, breaking out many of the card details so you can compare things like interest rates, bonus rewards and balance transfer promotions on the best credit cards out there.