Click below to listen to our Consumerpedia podcast episode on how to find the right credit card.

Banks, credit unions, airlines, hotels, and retailers inundate us with credit card offers. Consumers with good credit have hundreds of choices.

To pick the best card or cards for you, consider how you manage your money, how you use credit, and why you want a new card. Is it to get better spending rewards? To better manage monthly cashflow? To buy something you can’t really afford?

“Credit cards are the best financial tool around, if they’re used properly. If they’re not used properly, they’re the worst financial tool around,” said Bill Hardekopf, CEO of BillSaver.com, a personal finance website. “Using them properly means paying them off in full and on time every month. If you are not going to do that, then don’t apply for a credit card.”

Start by asking yourself the most important questions: Does using a credit card encourage me to overspend and create debt? Also, what do I want this card for, and how will I use it?

If you pay off your credit card balances each month, a rewards card is probably the best option, since it’ll net you cash or points.

Need to make a large purchase and know you can’t pay the balance in full? Limit your search to cards that offer low interest rates and don’t charge annual fees.

Check Your Credit Scores

Before comparing offers, check your credit scores to help you narrow your options. (Most rewards cards are available only for those with good-to-excellent credit scores.)

Many banks now provide free credit score checks as a perk for accountholders. You can also get free scores at websites such as NerdWallet.com, WalletHub.com, and FreeCreditScore.com. But these and other sites share your personal information with other marketers. They also offer fee-based credit- or identity-theft monitoring services; DO NOT pay for them, they’re junk. Click here for advice on how to monitor your credit and protect yourself from identity and cyber theft.

Credit scores lower than you thought? Improve them before you apply for a card by paying all bills on time (or early) and reducing your debt.

Some card issuers now offer a prequalification process showing your odds of getting approved for their cards without a “hard” credit check, otherwise required for applications. A hard inquiry may lower your credit scores by a few points, but only temporarily; the prequalification screening process uses a “soft” credit check, which does not affect your scores.

How to Compare Offers

Focus on interest rates and fees, including annual fees, late payment fees, and, if you travel internationally, foreign transaction fees.

Because credit card interest rates are at historically high levels, carrying a balance has become even more costly. Here are the latest numbers for the U.S.:

• As of August 2023, the average credit card interest rate was 21.19 percent APR, according to the Federal Reserve.
• Almost half of all cardholders (47 percent) carry a balance from month to month and pay interest on that debt, according to Bankrate.com.
• The average credit card balance is $5,947, according to TransUnion.

Credit card APRs range between less than 15 percent to more than 30 percent, meaning some consumers pay interest-charge penalties twice as high as those with lower-interest-rate cards.

Make sure your search includes cards offered by credit unions and small banks; a recent market survey by the U.S. Consumer Financial Protection Bureau (CFPB) found that large banks tend to offer “worse credit card terms” and “substantially higher interest rates.” The agency found that, on average, the nation’s 25 largest credit card issuers charged interest rates eight to 10 points higher than credit unions and small- and medium-sized banks.

If you frequently travel internationally, look for a card with no foreign transaction fees. Otherwise, you’ll pay a one-to-three percent fee for each charge you make in foreign currency.

Try to avoid an annual fee, unless the card offers premium perks that will regularly benefit you, such as frequent flyer miles, free checked luggage, or free hotel nights. Make sure the value of the rewards you’ll accrue exceed the card’s annual fee (see below).

Rewards Cards

Many consumers enjoy credit card rewards such as points, miles, or cash rebates. There are three main types of programs:

• Cards affiliated with airlines or hotel chains
• Cards that offer points that can be redeemed to pay for any type of travel, for products and services with affiliated companies, or be donated to charities
• Cards that offer cash rebates

Because these cards come with high interest rates and, often, annual fees, only get one if you can pay off your credit card bill in full every month.

“Your rewards are only going to be worth it if you can pay in full. That’s just the nature of high credit card rates,” said Ted Rossman, senior industry analyst at Bankrate.com. “Even carrying a balance for a couple of months probably outweighs any rewards.”

If you opt for a rewards card, find one that fits your lifestyle. If you don’t travel much, don’t bother with cards that earn frequent flyer miles or hotel points.

Most rewards cards have annual fees, but you can find some good cash-back cards without them.

Rossman believes a cash-back rewards card is best for most people because “it’s very simple, straightforward, and universal… A no-annual-fee, two-percent-cash-back card is actually surprisingly hard to beat for most people,” Rossman said on Checkbook’s Consumerpedia podcast.

The key to picking the right rewards card is to calculate the value of the reward per-dollar-spent multiplied by your typical spending during the year, weighed against any annual fee. For example, if you charge $10,000 per year, it makes no sense to pay a $150 annual fee for a credit card that provides what amounts to a one percent rebate; you’d pay a $150 fee and collect only a $100 reward.

Calculating the value of rewards with some cards is challenging. Some offer higher reward amounts for things like restaurant and gas purchases; and some tier their awards so that customers whose spending exceeds a certain amount receive higher rebate percentages.

It can be hard to determine the value of airline credit cards, which usually offer one frequent flyer mile for every dollar spent. There are many factors at play. If you redeem miles for a short cheap route, the value of each mile can be less than a penny; if you redeem for a first-class ticket or upgrade on an international flight, and don’t have to give up too many miles, the value can be $.05 per mile.

Frequent-flyer-mile values further shrink if you pay booking fees for “free” tickets, or if a competing airline offers the same itinerary for a lower fare compared to the pile of miles you use. It’s reasonable to assume each mile is worth about a one-to-two-percent rebate.

The sign-on bonuses cards offer new applicants complicates this. You’ll have to decide if, say, 40,000 bonus points is worth the annual fee or creates a better deal for you than, say, getting a competing card that provides a straight two percent cash rebate.

Credit card companies love rewards programs because they encourage spending by making you feel as if you’re getting paid to shop. Don’t let a quest for points or miles skew your decisions away from the cheapest options when buying airline tickets or booking hotel rooms.

Balance Transfer Cards

Credit cards that offer a promotional zero percent interest rate on balance transfers can help you save money—and get your head above water sooner. By transferring a balance from another card, you stop paying interest on that debt for up to 21 months (depending on the offer). To qualify, you’ll generally need at least a good FICO credit score (670 or higher).

“If you are able to pay off your debt in full before that promotion ends, you can save a substantial amount of money,” said Sara Rathner, credit cards expert at NerdWallet. “The caveat is that once the promotion is over, and you still have remaining credit card debt, you’re going to begin owing interest on that once again.”

To calculate how much you’ll need to pay each month, divide the amount you owe by the number of months of zero interest you’ll get with the new card.

Keep in mind that there’s usually a three to five percent fee to transfer your balance, but Rossman believes the interest savings are worth it. The transfer fee for $6,000 of debt will cost about $180 to $300.

“Considering that [making] minimum payments would keep you in debt for more than 17 years and cost you about $9,000 in interest, I really like the balance transfer approach, provided that you can make real progress during the term,” Rossman said. “But don’t just kick the can down the road.”

Note: If you’re in serious financial trouble, consult a nonprofit credit counselor who can help you create a budget and get you on the right track. Find one via the National Foundation for Credit Counseling. In most cases, the initial consultation is free.

Retail Credit Cards

Whether you shop online or in-store, you’ll probably be pushed to apply for the retailer’s credit card at checkout. This usually offers you a discount on the purchase you’re about to make if your application is accepted.

Retail cards can be a good fit for loyal customers because you’ll get a big rebate when buying at that store—up to five percent—along with ongoing perks, such as member discounts, free shipping, early access to sales, and longer return periods.

Some retail cards are co-branded with Visa, Mastercard, American Express, or Discover, so you can use them anywhere. Store-only cards, such as those from the Gap companies, Macy’s, Ross, Victoria’s Secret, Home Depot, and Lowe’s, can be used only for purchases from that retailer.

Because store cards have significantly higher interest rates than most other cards (28.93 percent, on average, according to Bankrate.com), don’t get one unless you plan to pay the balance off in full each month.

Don’t let salespeople rush you into applying for a store credit card. It’s not a snap decision. If you are planning a large purchase and are considering signing up for a retailer credit card, review all terms and conditions before you head to the store, Rathner said. If the card makes sense for you, apply online, and then take advantage of the sign-up bonus when you go shopping.

Secured Credit Cards

A secured credit card is a good option for those with low credit scores or slim credit histories who don’t qualify for conventional cards. With them, the credit limit provided is equal to the amount you deposit with the lender as collateral, typically $200 to $5,000.

The interest rates on most secured cards are significantly higher than on other types of credit cards. Even top-rated secured cards charge 26 to 31 percent interest, so it’s important to not carry a balance.

Because your payment history will be reported to the credit bureaus, pay off your bill in full and on time each month. And keep your balance well below your credit limit—30 percent or less, if possible—even if it means making more than one payment each month to do that. That will help you build up your credit scores, and allow you to apply for a conventional credit card with a higher credit limit and lower APR. With some lenders, you will automatically graduate to an unsecured card after making a specific number of consecutive on-time payments.

How Many Credit Cards Should I Have?

You don’t need more than one, but there can be advantages to having a few.

“Obviously, it’s more emergency spending power, but it also gives you access to better rewards, and it allows you to take advantage of attractive sign-up perks that might come around every so often,” said Jill Gonzalez, an analyst at WalletHub. “There’s also more information reported to major credit bureaus each month, so you can build credit faster if you need to.”

On the other hand, it’s easier to rack up credit card debt when you have a wallet full of cards; and because there are more due dates to monitor, it’s easier to miss a payment.

Are the Cards I Have Still the Best Options for Me?

Every year or so, review the cards you have to see if they’re still a good fit with your lifestyle. For example, an airline rewards card or an account tied to a hotel loyalty program doesn’t make sense if you’ve cut back on travel.

If you decide to get rid of a card, rather than close the account, which will lower your credit scores, consider checking with the card issuer to see if it can switch you to a different type of card that works better for your current situation. Maybe there’s one with a lower interest rate, no annual fee, or rewards that make more sense.

More Info from the Consumer Financial Protection Bureau:

• Credit Card Basics
• Six tips to consider when you’re offered a retail store credit card
• Where can I get my credit scores?

Listen to our Consumerpedia podcast “Dealing with Debt.”