When it comes to credit cards, there is no one-size-fits-all answer. Choosing the right credit card for yourself depends on a number of things, such as:
- What is the main purpose of the credit card?
- What do you normally spend money on?
- What kinds of rewards are appealing to you?
- Are you brand loyal?
Answering these kinds of questions will help you decide on what your first or next credit card should be.
A Word on Credit Card Usage
Liann and I are big believers in financial and personal responsibility. We believe the main purposes for obtaining credit cards are to build credit history and utilize the benefits of credits (reward points, comps, and other perks). If your main purpose for wanting a credit card is to spend more money by artificially inflating your purchasing power through borrowed money, then stay away from credit cards.
Learn more about credit card usage in Top 7 Rules for Credit Cards
Credit Card Categories
For the purpose of this article, I won’t be diving deep into each category, though it is beneficial to summarize each one.
Reward Credit Cards
Reward cards earn reward points or cash back on purchases that can be exchanged for goods and services through the company’s reward portal. Reward credit cards include cards that focus on specific industries like airlines, hotels, and retail.
Low Interest Credit Cards
Low-interest cards offer long introductory interest periods or generally low interest when carrying balances.
Balance Transfer Credit Cards
Typically, credit cards charge a fee for transferring balances from other credit cards. Balance Transfer cards have lower fees when transferring a balance.
Credit-Building Credit Cards
These type of cards are for people that either have limited to no credit history or have bad credit history and need to rebuild their credit.
Find out more information from NerdWallet in Credit Cards 101
Top Tips for Credit Cards
Get that Signing Bonus
Reward Credit Cards nearly always have sign-up bonuses when becoming a new member. Bonuses can vary based on promotions, so make sure you are signing up during the peak for these bonuses.
It’s Not All About the Rewards – Other Benefits Can Triumph!
While most of the focus is on the rewards structure of a credit card, it may not be the best feature of the card. For example, our Chase Sapphire gets 3x the points on travel and dining, but other features add amazing value to this credit card. These features include primary rental car coverage, Priority Pass, and Global Entry. Make sure to check out all of the benefits of a card before making your final decision.
Maximize Your Rewards
The best way to maximize your rewards is to try to limit the purchases on a credit card to the purchases that earn the most rewards. That way, you aren’t wasting money on one credit card when you could be earning bonuses on another.
Brand Loyalty Pays
If you are a person who is typically loyal to a brand, then a brand specific credit card can really pay off. Brand specific credit cards, like Airline Credit Cards, have great rewards when you make purchases through that company. Though one caveat is that the brand may not always have the best prices. You should decide what is best for you.
Annual Fee Cards Can Be Worth It
I used to avoid credit cards with high annual fees, but once we tried the Chase Sapphire Reserve, I converted. The value of the Chase Sapphire Reserve is worth the annual fee. In fact, I am happy to pay it. This may not be the story for all annual fee cards, so make sure the card’s benefits are appealing to you.
Don’t Just Get the “Best” Credit Card
There are a lot of great credit cards, but don’t just get one because someone or some article said it was the best…Unless it is the Chase Sapphire credit card, because it is the best! In all seriousness, if you don’t use the benefits or make purchases in that industry or company, then it won’t be the best for you. How you benefit from a card is the biggest decision point when choosing a credit card.
Don’t Get a Credit Card to Reduce the Cost of a Purchase
Companies always try to influence you to sign up for their brand’s credit cards. Often when making big purchases or shopping online, companies will offer you a discount if you sign up for their brand’s credit card. Don’t do it. It’s not worth it. The credit cards are typically sub-par and you most likely won’t use the credit card that often. The only time I can advise doing this is if you are constantly making purchases through the brand, such as through Amazon or Expedia.
Cancelling a Credit Card
Typically, this is frowned upon. In the right circumstance, however, it is fine to close a credit card. One example would be closing the credit card you signed up for when purchasing a couch or refrigerator. Closing a credit card can hurt your credit score, but that is because closing it has lowered your line of credit and shortened your credit history. This can be offset by signing up for a new credit card when cancelling another.
If you are new to credit cards and have a stable job, I would suggest starting out with a Reward Credit Card that has no annual fee and offers bonus rewards on purchase you typically make. When I was starting out, most of my purchases were on gas and groceries. Therefore, I got an American Express card that gave 3% cash back rewards on supermarkets and 2% on gas. It allowed me to rack up cash back quickly, which I was able to trade in for Gift Cards or Statement Credit.
For Expanding Your Credit Card Arsenal
If you already have credit cards and would like to open more, the best advice I can give is for you to find out what is currently not covered by your current credit cards. The last credit card we opened was the Chase Sapphire. We did so because we did not have a general travel card. At the time, we were not receiving rewards on airline tickets, rental cars, and some hotels. The Chase Sapphire was the solution.
Researching Credit Cards
Personally, I think NerdWallet is the best resource when it comes to researching credit cards. I have found their information to be spot-on and the site is feature-rich. Comparing credit cards is easy and user-friendly.
Another great option when researching credit cards, CreditCards.com has a ton of information and simple navigation to access the information.
This blog has great reviews on Reward Credit Cards and helps readers maximize their rewards.
Our Credit Card Set-up
Both Liann and I have had this card individually for a long time. It is a basic card that gets cash back on supermarkets and gas, so that’s what we use it for. I consider this a tried-and-true card.
Liann and I have this card individually and love it. Every quarter, it changes bonus categories. Purchases within those categories generate 5% cash back. It’s a good flexible card to have.
This is our beloved hotel, dining, and brand loyalty credit card. Liann and I travel a lot. If we are staying in a hotel, it is typically an IHG property. The credit card gets us 10x points when used on IHG properties, which grants us status. We also receive a free 1 night stay at any of their properties. It has a ton of other benefits, but the bottom line is that it’s an awesome credit card for us!
The Chase Sapphire Reserves is the pride and joy of all of our credit cards. This card has so much value packed into it. We got this credit card to satisfy our travel needs that were not covered by the IHG. The Chase Sapphire Reserve awards 3x points on travel and dining, plus a 1.5% exchange rate when redeeming for travel and a $300 travel credit every year. One of my favorite features of the card is that it has primary coverage on rental cars. Now, I never have to worry about coverage when the rental car companies are soliciting coverage to me.
Have any questions? What is your favorite credit card? Share in the comments below.