Do you ever wonder if your credit card is subpar—and if another one might get you better perks or deals?
No wonder, given the 1,000-plus cards you can choose from. “There are so many options today, it can be hard to know which one is best for you,” says Matt Schulz, senior industry analyst at the rating firm CreditCards.com.
To match you with a card that’s a good fit, we found the best ones for seven types of consumers. But be warned: Credit card rewards and special offers can change “at the drop of a hat,” says Kimberly Palmer, credit card expert at NerdWallet.com, which conducts card research. So double-check all terms before you sign up.
The Everyday Spender
You use plastic for daily needs like gas and groceries.
Consider: A cash-back deal
Cash-back credit cards give rebates on purchases—typically 1 to 5 percent of the purchase price. The higher the percentage returned, the more likely it will be restricted to a particular type of spending, such as gas or groceries. If you spent $1,000 in a month on qualifying purchases, you’d likely get back between $10 and $50 as a check or a credit on your bill, depending on your card’s terms.
NerdWallet and Consumer Reports have free, simple online tools that match a card to your spending habits. Some cards offer better deals for specific categories, such as dining or gas; others have a single cash-back rate for everything you buy. For example, the no-fee Citi Double Cash card gives you 1 percent cash back on all purchases, and 1 percent when you pay off the charges. The American Express Blue Cash Preferred card (annual fee: $95) offers 6 percent cash back on up to $6,000 in annual spending at supermarkets, and smaller rebates at other merchants. And the no-fee AARP Card from Chase gives 3 percent back when used at gas stations and restaurants, plus 1 percent everywhere else.
Caveats: Some cards change deal terms every few months, and you may have to “activate” specific categories online to get the cash. Issuers can be nitpicky. American Express, for example, excludes superstores and warehouse clubs from its 6 percent deal. Finally, these deals aren’t worth paying double-digit interest rates on carried balances, so prioritize debt repayment over getting cash back.
You frequent hotels, airports, auto- rental companies and restaurants.
Consider: A card with great rewards and few restrictions
Similar to a frequent-flier program, a rewards credit card gives you points that you can redeem for free plane tickets, lodging or upgrades. Some, tied to a particular airline or hotel chain, give you extras like free checked baggage or bonus points when you patronize that company. Other reward cards aren’t brand specific.
“What matters most in a travel card is flexibility,” Schulz says. “Unless you’re loyal to a certain airline or hotel chain, you want a card that gives you the most options for redeeming your points or rewards.” Chase Sapphire Preferred (annual fee: $95, waived the first year), like some other cards, lets you transfer points directly to certain airlines or hotels, but Chase will also raise your points’ value if you book travel through its Chase Ultimate Rewards site. The no-fee Bank of America Travel Rewards credit card awards bonus points if you’re also a banking customer, with the quantity based on the size of your accounts with Bank of America or Merrill Lynch.
Traveling overseas? Get a card that, like these, doesn’t charge foreign transaction fees, which can be up to 3 percent of every purchase. “People are often surprised when they come home and open their statements,” Palmer says.
Caveat: The value of reward points isn’t fixed, says Jeff Blyskal, senior editor of Consumer Reports, so it’s hard to know the real cash value of the points you accumulate. Sites such as ThePointsGuy and NerdWallet provide point-value estimates, but if the math makes your eyes glaze over, get a cash-back card instead and bank that money for your next trip.
The Recovering Borrower
Your credit score has taken a hit.
Consider: A secured card
The right card, used wisely, can help pave the way to a higher credit score—which in turn can lead to lower rates on other borrowing.
To rebuild your credit, try a secured card, Blyskal says. You open the account with a cash deposit—say, $300—that usually defines your credit limit. Options include OpenSky Secured Visa, which doesn’t require a credit check; the no-fee Capital One Secured Mastercard; and the no-fee Discover it Secured Card, which offers some cash-back rewards. All three cards will report your payment history to credit bureaus, helping you create a record that could boost your score.
Caveat: Don’t confuse this with a debit card. You have to pay off your purchases every month or pay a high interest rate. Secured cards often have an annual percentage rate (APR) in the 25 percent range, compared with 16 percent for the average credit card.
You want a card only for emergencies.
Consider: A cash-back card with no annual fee
Since you’re hoping not to even use your card, don’t get one with a yearly charge, Schulz says. And while you might not want to deal with points or rewards, “a simple cash-back card could be worthwhile,” he says. If you do have to spend a chunk of money suddenly, you might as well get some money back. Do you worry you’ll have to care for a relative in a distant city? Consider a card that gives you cash back on gas or travel reward points.
Caveat: Check the interest rate you’ll be charged for carrying a balance, advises Schulz: “Some emergencies might take more than a month to pay off.” That’s generally when interest charges start accumulating.
Your teen or college-bound student needs a starter card.
Consider: A secured card for students
Thanks to 2009 legislation intended to limit debt among young adults, people under the age of 21 have a hard time getting a standard credit card on their own, explains Blyskal. But the teen in your household has some alternatives.
One is for you to cosign for a new card for your child, which will help build his credit history—useful if he wants to rent an apartment after graduation or take out a car loan. That’s better, Blyskal says, than just adding him to your own card as an authorized user, which won’t always help his record and would inconvenience you if his card got lost or stolen.
If you’re concerned he might spend like a sailor—with you on the hook as a cosigner—Palmer suggests a low-limit secured credit card. Several of these cards, in fact, are targeted directly at students, including Discover it for Students, Journey Student Rewards from Capital One and Citi ThankYou Preferred Card for College Students. They all come with low or no annual fees and good rewards or cash-back deals.
Caveats: Late payments (a hazard for new card users) can incur onerous penalties. Also, take note of appealing introductory terms—for example, zero percent interest for the first six months—and set an alert on your calendar for the date those terms expire, Blyskal says.
The Small-Business Owner
You track expenses and watch every penny.
Consider: A business card
Depending on your spending, Palmer says, the rewards on cards aimed at small businesses can be greater than what you’d get from using a personal credit card. The Chase Ink Business Preferred card, for example, gives you triple reward points for up to $150,000 in annual spending on certain business costs, including shipping and online advertising. If you make a wide range of purchases and prefer cash back, the Capital One Spark Cash for Business gives you a flat 2 percent back on all purchases.
Caveat: Charging personal expenses to your business credit card isn’t illegal, but it can create accounting headaches at tax time, Schulz says. So use the card only for business expenses.
The Big Debtor
You’re carrying a substantial balance you’d like to pay off.
Consider: A no-fee, zero percent introductory rate balance- transfer card
If you’re among the nearly half of U.S. credit card holders who carry a balance on their card, the objective is to lower that debt, and the cost of that debt, over time.
A good strategy is to move your balance to a new card that offers a temporary zero percent APR, giving you time to pay down that debt without incurring more interest. Balance transfer fees of 3 to 5 percent are common, but the BankAmericard and Chase Slate cards waive that fee for transfers made within 60 days of opening an account. Most balance transfer cards with a zero percent introductory rate offer it for 12 or 15 months, Palmer says. However, the Citi Simplicity card has a zero percent rate for 18 months, and no late fees.
Caveats: The zero percent interest on your transferred balance may not apply to new purchases, so you could be charged interest on every new purchase you make with your new card. So check terms and use a different card, if necessary, to avoid accruing interest on current spending. Do you see a tempting no-fee balance transfer offer from your current card issuer? The company probably won’t let you switch to that deal, Palmer says.
MP Dunleavey has written for the New York Times, Money and MSN Money.