The best credit card is one that meets your unique needs.
The best credit card is one that meets your unique needs.
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The best credit card is one that meets your unique needs. At SuperMoney, our recommendation ratings are powered by real user votes. Discover top-rated options, from rewards and sign-up bonuses to 0% APR offers and credit-building tools. See what others recommend to find your perfect match.
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 a recent report:
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 check here issuer every time you swipe your card. Examples of issuers include Chase, copyright, copyright, 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.
Payment history
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.
New credit
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.
Credit mix
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.