What credit card should I get?

One of the questions I’m asked the most is, “Which credit card should I get?”

There’s not a one-size-fits-all answer, but here’s how to narrow it down:

Which credit card to choose if you carry a balance 

If you’re in credit card debt, then you need to prioritize your interest rate over rewards. The average credit card charges 16.05%. It doesn’t make sense to pay interest just to earn 1%, 2% or 3% in cash back or travel points.

If you have credit card debt, forget about rewards for now. You can avoid interest for up to 18 months with the right balance transfer card. And some card issuers (especially credit unions) charge ongoing (non-promotional) rates as low as the 6%-9% range. Don’t chase rewards if you’re revolving a balance.

If you have credit card debt, I recommend these cards:

  • Citi Simplicity® Card*: 18-month 0% intro balance transfer offer; transfers must be completed in the first four months; 3% balance transfer fee ($5 minimum); 0% introductory purchase APR for 18 months; regular variable APR of 14.74%-24.74%
  • Wells Fargo Cash Wise Visa® card: 15-month 0% intro balance transfer offer; intro balance transfer fee of 3% or $5 (whichever is greater); transfers must be made within 120 days to qualify for intro offer; 0% intro purchase APR for 15 months; regular variable APR of 14.49%-24.99%; regular balance transfer fee of 5% or $5 (whichever is greater)
  • BankAmericard® credit card: 12-billing-cycle 0% intro APR balance transfer offer; must complete the transfer within 60 days of opening the account; 3% or $10 transfer fee, whichever is greater; introductory 0% purchase APR for 12 billing cycles; regular variable APR of 12.99-22.99% on purchases and balance transfers

See related: Balance transfer cards with no transfer fee

Which card to pick if you don’t have any credit card debt 

Now we’re on to the fun stuff! The key questions at this juncture focus on how much effort you want to put in, how you spend your money and what you want to get out of your rewards.

Some people treat credit card rewards like a game. It’s fun for them, and they spend time looking for the best deals and juggling multiple cards. Yet about three-quarters of credit card holders prefer simplicity and would rather use the same card or two as widely as possible, we found in an August 2019 survey.

You won’t get the best rewards with that approach, but you can still do pretty well. Here are my favorite flat-rate cash back cards:

  • Alliant Visa Signature Card: 2.5% cash back on every purchase with a $99 annual fee; in your first year (waived your first year)
  • Citi® Double Cash Card: Essentially 2% cash back on everything (technically 1% when you buy and 1% when you pay it off); no annual fee

If you make more than $20,000 in credit card charges in a typical year, the Alliant Credit Union Visa Signature is a better bet despite the annual fee.

Which card to pick if you’re willing to put in a little work to earn better rewards 

Dividing your spending among multiple cards is the best way to reap higher returns. At this stage, you need to consider how you spend your money. Different cards incentivize different types of spending (e.g., travel, restaurants, groceries, entertainment).

You also need to think about your desired redemption. Cash back has the broadest appeal (after all, who couldn’t use a little more cash?), although travel rewards are usually the most valuable. Some 49% of U.S. adults have at least one cash back card, 20% have an airline or hotel rewards card and 19% have a general travel rewards card, our research shows.

Chase Sapphire Reserve, the American Express® Gold Card, the Citi Premier® Card and the Capital One Venture Rewards Credit Card).

Each of these issuers has more than a dozen airline and hotel transfer partners, plus you can book an even wider variety of flights and hotels directly through the card companies. These programs provide tons of flexibility, and in terms of cents per point, they generally offer higher returns than cash back cards.

Parting advice

As you can see, picking the right credit card for you is an individual decision. I’ll leave you with two more thoughts:

You’re doing well as long as you’re avoiding credit card debt and redeeming rewards for something that’s valuable to you.

Not everyone wants to fly to the Maldives in first-class and stay in an overwater bungalow. Even if it yields fewer cents per point, a free flight to grandma’s house or cash back on everyday purchases could make more sense for your particular situation.

You should absolutely consider sign-up bonuses when evaluating credit cards, but don’t lose sight of the fact that your credit card strategy should be a long-term pursuit. Especially if you’re new to credit, focus on ongoing value rather than card churning.

* Information about Citi Simplicity has been collected independently by CreditCards.com. The issuers did not provide the details, nor are they responsible for their accuracy.

Source: creditcards.com

10 cash back credit card mistakes you need to avoid

Almost half of American adults (49%) hold a cash back credit card, according to a 2019 survey from CreditCards.com.

But that same research reveals that we don’t always make the most of card rewards.

About 88% of cash back card holders redeemed their rewards over the past year, which suggests some consumers either hoarded their cash or just let it sit unused.

What’s a cash back lover not to do? Here are 10 common cash back mistakes to avoid – along with a few tips for squeezing every dollar from those rewards.

10 common cash back credit card mistakes

  1. Not finding the right card that best suits your real life
  2. Saving rewards for too long or not cashing them in strategically
  3. Neglecting to register for those quarterly bonus categories
  4. Not using rebate coupons and shopping portals to boost cash back
  5. Being dazzled by sign-up bonuses
  6. Ignoring spending caps
  7. Carelessly using cash back cards for ‘autopay‘
  8. You’re not avoiding foreign transaction fees
  9. Carrying a balance on your card
  10. Sticking with the same old card without shopping new options

1. You’re not finding the card that best suits your lifestyle

“With cash back cards, there are so many flavors and options,” said Marc Bellanger, senior director of financial services for Merkle, a marketing firm for the financial services industry.

And depending on your lifestyle and where you spend money, there may be a card where you earn more, he added.

The secret: Tally up how much you’re spending in various categories such as travel, dining, groceries, etc., said Julie Pukas, head of U.S. bankcard and merchant solutions for TD Bank. Her advice: “Really understand what you are really looking for and where you are spending.”

You can also maximize your cash back earnings by shifting (not increasing) some of your everyday spending to the right card.

If you spend a generous amount of your paycheck on groceries, maybe a card that offers an extra bonus for purchases at supermarkets is what you need.

If you don’t eat out much, a card that offers an extra bonus on restaurants might not be worth your attention.

And if you are willing to use your card everywhere. but don’t want to spend time figuring out what card to use on every purchase, perhaps a flat-rate cash back card is the way to go.

The other factor in your equation: annual fees. “Using a no-fee card is a win-win,” said Zach Honig, editor-at-large at The Points Guy. And some of the best cash back cards have no annual fee.Chase Freedom Flex℠ or Chase Freedom Unlimited® card, you accumulate cash back benefits worth about 1% to 1.5%.

But if you bank those rewards and redeem them for travel through one of the Chase Sapphire cards, you can get an extra bonus worth 25% to 50% of your points.
extra bonuses on specific categories year-round, others increase your cash back in rotating categories – which change quarterly – if you register for them online each quarter.

In some cases, such as with some Chase or Discover cards, this can quintuple your cash rewards.

“If you’re not activating those quarterly bonuses, that’s a mistake,” Honig said. It’s also a good time to note the new spending categories, so you’re using the card that gives the most for your purchases.
Ibotta), coupon codes and shopping portals (such as Rakuten and Upromise) to stack extra savings on top of cash back rewards, said Brian Preston, CFP, managing principal for Abound Wealth and host of The Money Guy Show podcast.

If you can pile up cash back bonuses, portal rebates and coupon codes, “that’s the trifecta,” Preston said.

Interested in mastering the art of rewards stacking? See “3 ways to stack your rewards at the gas station” and “How to stack rewards to save big on purchases.”
Costco Anywhere Visa® Card by Citi offers 4% back on up to $7,000 in eligible gas purchases (then it’s 1%) every year.cash back card for bills is a great way to hit spending thresholds and rack up cash rewards.

“Essentially, it’s a 2% off coupon,” said Preston.

But that doesn’t mean you have to put bills on autopilot, said Honig.

After frequently finding small erroneous charges on bills, Honig has learned that “it makes sense to review everything” – and use the cards to pay electronically without putting bills on automatic.

Also, if bills are larger than expected (and too much for your credit line), that autopay could max out your card. Or the payment could even be denied.

Any resulting penalty fees might also cancel any hard-earned cash back on your card.
foreign transaction fees, some cash back cards still have them, said Honig.

Foreign transaction fees generally add 3% to your purchases made abroad, and you don’t have to be a high-flyer to get hit with them.

“If you make purchases [from websites or companies] outside the U.S., it’s something to keep an eye out for,” he added.

Easy hack: If you plan to use your cash back card while traveling outside the U.S. or at foreign websites, consider signing up for a card that doesn’t charge foreign transaction fees.

42% of Americans don’t pay off card bills in full every month, according to the American Bankers Association.

That’s a losing game.

The average APR on cash back cards is about 1.3% monthly, so if your cash back card is paying 1%, you’re leaking money.

And if you’re getting 2%, you’re barely breaking even.

Want to get all the juice from your cash back card? Spend only what you can afford to pay each month.

If you need a card you can occasionally revolve, shop for a card that includes a 0% APR promotional offer.
switching cards doesn’t have to sink your credit as long as you do it correctly.

If you’re looking at switching cash back cards (and closing one), said Daraius Dubash, co-founder of MillionMileSecrets, make sure you’ve cashed out all your rewards before you close the account.

See related:  How cash back credit cards work

Source: creditcards.com