Which Credit Card is Best for You?

Which Credit Card is Best for You?

Credit cards often get a bad rap in the world of personal finance. The negative connotations aren’t entirely unjustified. When used poorly and mismanaged, credit cards can lead to a world of trouble for you and your money.

With high limits and even higher interest rates, you can quickly rack up an overwhelming amount of debt if you charge more than you can afford to repay to your credit card and then start carrying a balance.

But credit cards can also be useful tools to help you leverage your cash flow. If you only charge what you allocated to spend and pay off the balance in full and on time every month, you can make every dollar in your budget stretch just a little bit further through reward points and cash back on purchases you needed to make.

You can start by choosing the best credit card for you based on your spending habits and financial goals.

If You Want to Make the Most of Every Dollar You Spend…


You’ll want to check out a great cash back credit card. These cards allow you to earn money for every transaction you make. Most offer a minimum of 1% cash back on all spending, and some of these rewards cards allow you to earn more based on the category you spend in (like 3% on gas or 2% on groceries).

For the best everyday spending cash back credit card, check out the Citi® Double Cash Card. It has no annual fee, allows you to check your FICO score monthly with your statements, and offers 1% back on all your purchases. The best part? You can earn an additional 1% (for a total of 2% cash back) when you pay your statement on time.You receive your cash as a statement credit, check in the mail, or gift card.

This means you’re rewarded when you practice good credit card management: you earn more when you pay your bill! You can receive your cash as a statement credit, check in the mail, or gift card.

If you’re willing to keep up with the spending categories you spend the most in and update them throughout the year, you may want to try the Chase Freedom® card. This requires that you have a good understanding of your budget and where you spend the most money.

You can earn 5% cash back on specific bonus categories that rotate each quarter. In the past, those categories included gas, groceries, and restaurants. You also earn 1% cash back on all other purchases.

The drawback is that you need to update your bonus category multiple times throughout the year, and if you don’t spend in that particular category you’ll only get 1% cash back. But there’s no annual fee on this card, either, making it a good choice for saving more in specific areas of your budget.

If You Want to Travel More…


Cash back cards are great if you want to keep things simple and save a little bit of money on your everyday purchases. But because the credit card issuer allows you to earn that reward in dollars, the reward is worth a little bit less than if you earned rewards in points.

What if one of your financial goals is to travel or take more vacations? In this case, the best credit card for you would be one that was specifically designed to reward you for spending you did on travel. That’s because points you redeem through reward portals are worth more than if you cashed those points in for dollars.

The Capital One® Venture® Rewards Credit Card provides the best bang for your adventure buck by allowing you to earn miles that can be redeemed on any travel purchase. You can earn 2 points per $1 spent. The card will give you a one-time bonus of 40,000 miles if you spend $3,000 within the first 3 months of opening the card (which is worth $400 when you apply it to travel expenses).

If you’ve looked into travel and rewards credit cards, you may have heard of the Chase Sapphire Preferred card, too. It’s the cool kid on the block right now and a really popular option (for good reason; it does offer nice perks and rewards). But there are a few reasons you may want to go with the Venture card over the Sapphire:

  • The Venture card’s fee is lower ($59 versus $95, although both are waived in the first year).
  • The Sapphire card’s bonus is higher at $500-$625, but the exact value depends on how you redeem the bonus. The Sapphire requires you to redeem rewards through Chase’s platform to get the best rate, which reduces flexibility for people who aren’t super serious about reward/travel hacking.
  • The Venture card is more flexible, allowing you to redeem rewards at a solid rate on ANY travel expenses, not just airfare or hotels but things like taxi rides, some restaurants, other fees incurred while traveling, etc.
     

Are you loyal to an airline or a hotel chain? Look into their credit card offers, too. You might get more out of your reward points if you know you’re sticking to a particular brand when you take trips (just watch out for higher fees or lower reward values).

If You Want to Learn Better Credit Habits…


Rewards cards aren’t the only options out there, and they may not make sense for you if you currently struggle to manage your debt or spending. Cash back cards or ones that allow you to earn points may increase the temptation to spend (since, technically, you get “rewarded” for doing so).

If that’s the case, you might want to look for credit cards that are no frills, offer manageable credit limits, and won’t charge high fees that are easy to get approval for even with low credit. Here are some options to consider:

  • Digital Federal Credit Union Visa Platinum Secured Credit Card: This is a great option thanks to it’s $0 annual fee and it’s extremely low APR of just 11.75%. You do need to join the Digital Federal Credit Union before you can apply for the card, but it’s worth considering if you qualify for membership.
  • Citi Simplicity® Card with No Late Fees: Tend to forget about your credit card payment? This Citi card promises not to charge you a late fee, and also offers APRs as low as 13.99% (and there’s no annual fee, either!).
  • Discover it® Secured Card with No Annual Fee: Most cards that are good for building credit don’t offer any kind of rewards, but this one will allow you to earn 2% cash back on up to $1,000 on restaurants and gas every quarter and 1% on all other purchases
     

What to Keep in Mind When Choosing a Credit Card


This should help you get started, but there are countless credit card options out there and you may want to evaluate more choices before making a final decision. Here’s what to think about when comparing cards:

  • Note the APR on a card so you know what you’ll need to pay if you start carrying a balance. Some reward cards come with interest rates of 25% or more.
  • The most cash back a card offers, the more complicated the rules around earning that cash will likely be. Make sure you understand how you can earn a promised reward, so you’ll know if you’re willing to jump through any hoops required.
  • More rewards usually mean more fees. Review the card terms and conditions carefully and note any annual fees or other charges you need to pay to use the card.
  • If there’s a signup bonus, note the terms of receiving the reward. Most require you to spend a certain amount of money in a set period of time (like $3,000 in the first 3 months) in order to receive the bonus. Don’t spend more than your budget allows just to get that extra reward! The cash in your pocket today is worth more than credit card points.
     

Ultimately, credit cards can be great financial tools — but it never makes sense to spend just to try to get status or rewards. Stick to your personal financial plan and don’t charge more than you can afford (or planned to spend) to any credit card you use.

Mary Beth Storjohann
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Mary Beth Storjohann is a Certified Financial Planner (CFP®) and the Founder of Workable Wealth. She works as a writer, speaker and financial coach to arm her clients with th ... Click for full bio

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Paul Kingsman
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