With rewards, bonus points and VIP perks being thrown your way from popular credit card offers, deciding how to choose a credit card can be baffling. On top of this, with so many different reward programs, it seems that there’s a card out there for every type of spender. So how do you know which credit card is best for you?
In this guide, will take a look at what you should prioritize when picking the right card.
The path to choosing the best credit card starts with realizing that credit card issuers are also “picky shoppers.” Cards at different tiers have different credit score requirements. By checking your credit score first, you can see cards you’d likely be eligible for. This can help you avoid any unnecessary inquiries on your credit report.
Generally, most issuers want a minimum score between 670 and 700. Minimum scores for premium cards typically range between 700 to 800+. Card issuers will also examine your income to see if the credit card is affordable.
▶︎ Read more: How to check your credit score
Credit card rewards programs have been meticulously crafted to reward spending in specific categories. If you pick the right one, it can feel like having a custom card designed just to reward your habits.
For example, frequent travelers have the most to gain from travel cards as they offer generous rewards for flights and travel expenses. Non-travel cards are ideal if everyday shopping is your only spending type.
Another reason to review your spending habits is to know your balance payoff patterns. Knowing how much you spend lets you see how realistic meeting a card’s welcome bonus requirements will be. Most cards require you to spend up to several thousand dollars in the first three months after opening your account to qualify.
If you want to be strategic with your credit card choice, consider the card types below.
Travel cards are generally linked with airline loyalty programs and sometimes with hotels (think Delta SkyMiles, Southwest Rapid Rewards or Marriott Bonvoy cards).
For frequent travelers, these cards can offer generous points and cash back for travel. Most also offer free lounge access, TSA PreCheck/Global Entry credits and seat upgrades.
Rewards credit cards typically offer rewards in static or rotating categories. The perk is that you’ll get anywhere from 3X to 10X back in select categories compared to the standard 1X back most cards offer for non-bonus spending.
If you have past credit mistakes, a credit-building card lets you reestablish credit if you agree to a higher annual percentage rate (APR) and lower credit limit. These cards usually have fewer rewards and benefits than higher-end cards, but making on-time payments can help you qualify for more sophisticated cards.
Low-interest cards generally have a lower-than-average minimum APR of around 17.99%, with some issuers even offering 0% APR cards. For cardholders who need to pay for purchases slowly, this can be a way to reduce debt costs and pay down balances faster.
Balance transfer cards are sometimes interchangeable with low-interest cards. They typically have low introductory APRs. Some will even have 0% APR for 14 to 24 months for balance transfers. If you qualify, you can pay off existing credit card debt at 0% interest instead of your current APR.
Student credit cards are designed for students or new graduates who haven’t had a chance to build up credit. Generally, the approval threshold is lower than traditional credit cards. These cards can help first-time cardholders learn good credit habits while building their credit scores for the future.
Business credit cards are generally elevated versions of consumer credit cards. In anticipation of higher spending needs, credit card companies roll out bigger perks on these cards. They may also toss in special categories for business spending that reward purchases for advertising, commuting, technology and more. Issuers may offer employee cards, helping you work towards bonuses and rewards.
Individuals seeking a business credit card are typically required to provide evidence of their business income in order to meet the eligibility criteria.
While receiving a credit card offer in the mail that looks good can be exciting, it’s important to compare that card with its peers before signing up. Here’s what to look for once you’ve narrowed down the category of card you want.
Not all credit cards have annual fees. The general rule is that higher annual fees equal more rewards and benefits. However, you need to weigh the cost versus what you’ll actually earn from the card based on your spending habits. Ask yourself: How hard will you need to work to break even? How much do you expect to earn after recouping the cost of the annual fee?
A card like the Southwest® Rapid Rewards® Performance Business Credit Card lets you apply earned points toward paying yourself back for the annual fee. But before getting cozy with any annual fee, it’s important to know that they often change each year.
Always investigate a credit card’s APR. This number represents the total cost of charging/borrowing money with interest rate and lender fees combined. While the APR is generally variable, the average range is between 22% and 24%.
Welcome bonuses are probably the most compelling and controversial aspect of choosing a credit card. Popular credit cards advertise sign-on bonuses of 10,000 to 120,000 points! While it’s easy to get hypnotized by the possibilities, the truth is that your bonus amount will be $0 unless you meet the card’s specific requirements. In most cases, that’s spending between $3,000 and $10,000 within the first three months.
Earning a welcome bonus is more than doable for many cardholders. You just need to verify the math based on your anticipated spending habits during the requirement window after opening your account. Be careful not to stretch your spending too far just to hit the threshold.
There are two main points to consider when looking for rewards on a credit card. First, look at the actual reward rates. If you fly often, finding 4X, 5X or 10X back on flights and hotels is like hitting a gold mine. Even just getting 2X back on everyday spending makes a card a rare gem. Next, you need to look at how easily rewards can be redeemed.
Some cards allow you to easily apply points to flights, hotels or statement credits. They might also have transfer agreements with hundreds of hotels and carriers. Others are particular about where you can spend money. You may also suffer from a low transfer ratio if you spend your points with a transfer partner or purchase gift cards.
Another tip for picking a credit card is to look beyond rewards to see the total value of a card.
You could potentially get thousands of dollars in value if you select a card with:
While annual fees and APRs are the big ones to look for, cardholders must also be aware of “fine print” fees. If you’re looking for a card you can travel with, veer toward cards that waive foreign transaction fees. Business cards with $0 foreign transaction fees are especially advantageous if you deal with vendors in other countries.
You should also consider late payment fees before locking in with a card. A $40 fee for late payments is standard. Additionally, pay attention to balance transfer fees. This is the amount a lender will charge you for transferring existing debt from one card to another. These typically range between 3% and 5% of the transferred amount.
Credit card application requirements can be tough because lenders aren’t always totally transparent about their approval criteria. We do know that they use formulas that weigh credit scores and income.
Each card issuer has its own application requirements, including how many cards you can open in a short period. The most well-known one is Chase’s unpublished 5/24 rule, which states that you can’t be approved for their cards if you’ve opened five or more credit cards from any issuer within the past 24 months.
Card companies restrict the number of cards an applicant can have in their recent history because they want to stop customers from applying for cards just for welcome bonuses. Companies lose money when cardholders close their accounts before annual fees are due. If you’ve opened more than five cards within the past year, be prepared for automatic denial for any Chase card.
Another universal rule is that you have to be a new cardholder to qualify for bonus offers. There’s nuance to this. In most cases, you can have a card under the same umbrella as long as it’s different. For example, someone with a Southwest Rapid Rewards card can still apply for a Rapid Rewards business card. However, you can’t reapply for the same Rapid Rewards card you already have just to reset a bonus offer.
Once you’ve narrowed down a credit card based on your spending habits and reward preferences, it’s time to begin the application process. Whether you receive a card offer in the mail or your email inbox, lenders generally want you to apply online. However, most will allow you to call to apply if you can’t apply online.
If you already have an existing credit card account with a lender, you should be able to apply after logging into your account. If you’re a new applicant, you can usually apply as a guest. One tip is to look for a “preauthorization” option on the issuer’s website. Some credit card companies offer this option to let you know if you’ll likely qualify before going through the entire application process.
Always review the card terms and conditions thoroughly before submitting your credit card application. Don’t hit “send” until you know what you’re responsible for as a cardholder. It also helps to have all your paperwork out before you begin the application process to avoid timing out or needing to save your application for later.
Most lenders will request the following:
Once your new card arrives, activate it using the instructions provided before charging anything on it. Next, the goal is to pay the balance in full each month to avoid the APR. You should also continuously log in to your account to ensure you track and utilize rewards.
The first step is deciding if you’re willing to pay an annual fee for a card. Depending on the rewards and perks offered, typical consumer and business credit cards have fees ranging from $0 to $695.
Next, look at reward categories to ensure that you can maximize your earning potential based on your spending or travel habits. You should also ensure your credit score meets a card’s eligibility requirements.
Depending on your credit score and income, you can choose a basic or premium credit card. Frequent travelers and business owners who spend a lot on business expenses or travel have the most to gain from higher-end cards with higher annual fees in exchange for more elite perks.
If you simply want to start earning on everyday purchases, prioritize a card with 2X rewards on everyday purchases and groceries instead of a typical card with 1X for all purchases outside of travel.
Your credit score is the biggest indicator. Premium cards generally only approve applicants with credit scores in the “very good” to “excellent” ranges of 740 to 800+. Most mid-tier cards require scores of 670 to 739. If your score is below that, you may have to wait to bulk up your score or apply for a credit-building card.
While there’s no magic number, having what creditors call “mixed credit” actually strengthens your borrowing power. Credit cards are great for diversifying your credit sources to boost your credit score. Having two or three credit cards alongside one or two other forms of credit is generally recommended.
Ultimately, no credit card is the wrong card as long as its annual fee and APR are reasonable. If you qualify for a business card, settling for a consumer card can cause you to miss out on cash back and perks for travel and business expenses.
However, if you select a card that doesn’t reward your spending categories, you could miss out on opportunities to earn on every purchase. Spend time researching rewards and redemption options to ensure you can use the rewards offered.
Carrie O’Connell is a prolific writer specializing in consumer finance and credit cards. Her extensive portfolio includes content for prominent clients such as First American Bank, American Savings Bank Hawaii, Smartfinancial.com, Trustedcompanyreviews.com, United Debt Settlement, Ways to Wealth, and Investorade.
Carrie’s writing covers a wide range of topics, from credit card reviews and approval strategies to maximizing credit card benefits and navigating credit card use during economic downturns. Her expertise helps readers make informed decisions about their personal finance and credit card choices.
Blake Esken has over 15 years of experience in product management and has been a member of the Los Angeles Times staff for over five years.
As part of his role at the Los Angeles Times Commerce Team, Blake acts as the in-house reviewer and fact checker for LA Times Compare. He supervises all content for compliance and accuracy and puts to use skills he has honed through years of experience managing high-stakes projects for a range of industry-leading companies.
He has a strong background in data analysis, compliance, and communication, which allows him to support LA Times Compare through fact-checking in an effort to provide up-to-date and factual information across our content.
* Opinions expressed here are those of the LA Times Compare Cards Team and have not been reviewed or approved by any advertiser or entities included within this content. See our editorial policy for more details.
All products or services are presented in this content without warranty. The information, including card details such as rates and fees, is accurate at the time of publish. Please visit each bank's website directly for the most current information.
