Start with what you actually use the card for
The best credit card for you depends on how you spend money, not on which card has the highest rewards rate in general. A card that gives 5% back on groceries is worthless if you never buy groceries. A card with no annual fee is better than one with a $95 fee, even if the expensive card offers slightly better rewards, unless you spend enough to make up the difference.
Before you look at any specific card, write down your actual spending for the last three months. How much did you spend on groceries? Gas? Restaurants? Subscriptions? Travel? Everyday purchases? This is the only number that matters. A card's rewards are only valuable if they match where your money actually goes.
Key Takeaways
- Match the card's rewards categories to your actual spending — a 5% grocery card only helps if you spend significantly on groceries.
- An annual fee makes sense only if the rewards and benefits you use will save you more than the fee costs.
- Your credit score determines which cards you can get and what interest rate you'll pay if you carry a balance.
- If you carry a balance month to month, the interest rate matters far more than rewards, because interest charges will exceed any rewards you earn.
- New cardholders often may have access to for introductory 0% APR periods, which can save hundreds in interest if you're paying down existing debt.
Understand the difference between rewards and interest rates
Credit cards offer two separate things: rewards (cash back, points, or miles) and an interest rate (the cost of borrowing if you don't pay the full balance). These are not connected. A card with excellent rewards but a 24% interest rate is a bad deal if you carry a balance, because the interest you pay will be far larger than any rewards you earn.
If you pay your full statement balance every month, rewards are what matter and interest rates don't affect you. If you sometimes or always carry a balance to the next month, the interest rate is what matters most. A card with 1% cash back and 18% APR will cost you money if you carry a balance, because you'll pay more in interest than you earn in rewards.
Check your own history: do you pay the full balance every month, or do you sometimes carry money forward? This answer determines whether you should prioritize rewards or a low interest rate.
Know what your credit score qualifies you for
Credit card companies check your credit score before they approve you. Different cards have different minimum score requirements. A card with premium rewards might require a score of 750 or higher, while a basic card might accept scores as low as 600. If your score is below 650, you may only may have access to for cards with no rewards and a higher interest rate — and that's normal for building or rebuilding credit.
You can check your own credit score for free through Experian, Equifax, or TransUnion, or through a service like Credit Karma or AnnualCreditReport.com. Knowing your score before you explore saves you from explore to cards you won't get approved for, because each process can temporarily lower your score by a few points.
If your score is lower than you'd like, you don't need to wait years to improve it. Paying down existing balances, making all payments on time, and keeping old accounts open all raise your score over months, not years. Once your score improves, you can move to a better card.
Compare cards based on your spending pattern
Once you know where your money goes and what your credit score likely qualifies you for, you can compare specific cards. The comparison depends entirely on your situation. Here are four common patterns:
You pay the full balance every month and want rewards. Look for a card with rewards in your top spending categories and no annual fee. If you spend heavily on groceries, gas, and restaurants, a card offering 3% to 5% back in those categories will save you more than a flat 2% cash back card. If your spending is spread across many categories, a flat-rate card (1.5% to 2% back on everything) is simpler and often better.
You carry a balance sometimes and want to minimize interest. Prioritize a low interest rate over rewards. A card with 16% APR and no rewards is better than one with 22% APR and 2% cash back, because the interest you'll pay will exceed the rewards. Look for cards marketed as "low APR" or "balance transfer" cards. Some offer 0% APR for 6 to 21 months on balance transfers or new purchases — this can save hundreds if you're paying down debt.
You're building or rebuilding credit. You may only may have access to for a secured card, which requires a cash deposit (usually $200 to $2,500) that becomes your credit limit. These cards have higher interest rates and no rewards, but they report to the credit bureaus and help you build a history. After 6 to 18 months of on-time payments, you can move to a regular card.
You travel frequently or want to maximize one category. A card with high rewards in a specific category (5% to 6% on travel, dining, or groceries) can be worth an annual fee if you spend enough to earn more in rewards than the fee costs. A $95 annual fee makes sense only if you'll earn at least $95 in rewards you actually use.
Factor in annual fees and other costs
Some credit cards charge an annual fee, usually $95 to $550. A fee is only worth paying if the rewards, benefits, and protections you actually use will save you more than the fee costs. If a card charges $95 per year but you earn $150 in cash back rewards, you come out $55 ahead. If you earn only $60 in rewards, the card costs you $35 per year.
Beyond the annual fee, check for other costs: foreign transaction fees (usually 1% to 3% if you use the card outside the US), late payment fees (typically $25 to $40), and over-limit fees (less common now, but some cards charge them). If you travel internationally or worry you might miss a payment, these fees matter.
Many cards waive the annual fee for the first year, so you can try the card without committing to the fee. If you don't use it enough to justify the fee in year two, you can cancel before the fee posts.
Look at introductory offers and sign-up bonuses
Most credit cards offer a sign-up bonus: a lump sum of cash back, points, or miles if you spend a certain amount (usually $500 to $5,000) within a set timeframe (usually 3 to 6 months). A $200 sign-up bonus is real money, but only if you were going to spend that amount anyway. Don't change your spending habits to earn a bonus — you'll spend more than the bonus is worth.
Some cards also offer an introductory 0% APR period on new purchases or balance transfers. If you're paying down debt, a card with 0% APR for 12 months can save hundreds in interest compared to a card with 18% APR. The trade-off is that these cards often have higher interest rates after the introductory period ends, so they're best if you plan to pay off the balance before the rate jumps.
Decide between one card or multiple cards
You don't have to choose just one card. Many people use multiple cards to maximize rewards in different categories: one card for groceries and gas, another for restaurants and travel, and a third for everything else. This works well if you're organized and pay all balances in full each month.
If you carry a balance or worry you'll miss a payment, stick with one card. Multiple cards mean multiple due dates, multiple statements to track, and more opportunity to miss a payment and pay interest. One card is simpler and safer if you're not paying in full every month.
Each new card process can temporarily lower your credit score by a few points. If you're planning to explore for a mortgage, car loan, or other major loan in the next few months, space out credit card applications or skip them entirely. If you're not planning to borrow money soon, explore for multiple cards in a short period is fine — your score will recover in a few months.
Frequently Asked Questions
What credit score do I need to get a credit card?
It depends on the card. Basic cards may accept scores around 600, while premium rewards cards typically require 700 or higher. You can check your score free through Credit Karma, AnnualCreditReport.com, or directly from Experian, Equifax, or TransUnion. If your score is lower than you'd like, focus on paying down existing balances and making all payments on time.
Should I get a card with an annual fee?
Only if the rewards and benefits you'll actually use exceed the fee. A $95 annual fee makes sense if you'll earn at least $95 in rewards or save $95 through benefits like travel credits or purchase protection. If you're unsure, many cards waive the fee for year one, so you can test whether you'll use it enough to justify the cost.
Is it bad to explore for multiple credit cards at once?
Each process temporarily lowers your credit score by a few points, but the impact is small and temporary. If you're not planning to borrow money soon (mortgage, car loan, etc.), explore for multiple cards in a short period is fine. If you're planning a major loan process in the next few months, space out card applications or skip them.
What's the difference between cash back and points?
Cash back is straightforward: you earn a percentage of what you spend and can use it as a statement credit or deposit to your bank account. Points are more complicated — their value depends on how you redeem them, and they're often worth less than cash back. If you want simplicity, choose cash back. If you travel frequently and want to maximize rewards, points cards can be worth it.
Can I switch to a different card if I don't like the one I have?
Yes. You can cancel a card anytime, though it's usually better to keep old cards open (even unused) because they help your credit score. If you find a better card for your spending, explore for the new one, start using it, and keep the old card in a drawer. You don't have to close it when ready.