There are literally hundreds of different credit cards available from dozens of issuers, making it important to conduct a credit card comparison before you apply for one. To get you started in your search for a credit card we’ve prepared a comparison of all the different types in the market. We'll discuss how to find the best credit cards for you, including benefits, features, alternatives, and which credit cards to apply for. In short, you'll find all the details you need to know to make your search for your best credit card much easier.
The key benefits of credit cards
Credit cards can be used to cover everyday purchases including groceries, gas, and other goods and services. They can also be used to buy more expensive items such as travel packages, TVs, and even jewelry, especially if the funds needed aren’t at your immediate disposal. Apart being a convenient way to borrow and pay, they also provide:
- Increased purchasing power
- Rewards like airline miles, points or cash back
- Other free benefits, like travel insurance and airport lounge access
- Potential to build credit score
- Online shopping convenience
- The ability to secure a hotel room or rental car
- No foreign transaction fees in some cases
- Protection from fraudulent activity
- Free access to credit report and score in some cases
Features you can find on the best credit cards
When you're ready to apply for a credit card it’s important to find a card that will work for you, such are those with rewards to help you save money, potentially putting hundreds of dollars, even thousands, back into your pocket. As you make your credit card comparisons, select features that will be most beneficial to you.
- Rewards points. Points earned on purchases can be exchanged for airline miles—with some cards earning airline miles directly—merchandise, gift cards, hotel accommodation and other forms of travel, depending on the points program.
- Cash back. Cash back credit cards give 1% to 2% cash back on overall purchases, or up to 5%-6% back on categories like grocery shopping, restaurants and gas, or a different category of your choice every three months.
- Sign-up bonuses. Plenty of cards give great bonuses to new cardholders, for example a card that offers 50,000 points or airline miles when you spend $2,000 on purchases in the first three months after account opening.
- Travel perks. You may find a card that offers free checked bags, along with access to VIP lounges in airports. Other travel perks include rental car insurance, lost luggage reimbursement and roadside assistance.
- Low interest rate. A card with a low APR will help if you can't always pay off your monthly card account in full.
- Balance transfer at low or 0% interest rate. Consolidate your debts or just take a break from paying interest on your balance.
- No foreign transaction fees. This is a particularly useful feature if you frequently travel outside the country, and can also help you save if you make frequent purchases from online retailers from foreign countries.
- Free access to your credit score. If you want to work towards paying off debts and increase your score, it will help to check every now and then to verify that your score is still good. Some cards now give access to the cardholder's credit score, in some cases printing it on the monthly bill.
Understand the different types of credit cards
There are many different types of credit card, each suited to particular needs. You'll need to gauge which one will suit your own needs and lifestyle, so that you can work out which one to apply for.
Standard or "plain vanilla" cards
These are sometimes called “plain-vanilla” because they offer no rewards, and are plain and simple to understand. Most people choose this type of card if they’re not looking to earn rewards and if they want something that’s easy to understand without any added frills. They are often easier to be approved for.
Balance transfer credit cards
Many cards come with the capability to transfer balances from existing cards and loans, but the term is normally applied to a type of card that offers a low intro APR—possibly 0%—for balance transfers throughout a specified period of time. So if you aim to save money on high interest rates on an already existing account, then getting one of these is a great option. Balance transfer rates vary though, so be sure that you’re qualified to get ones that are as low as 0%. In many cases, the lower its promotional rate and the longer its promotional period is, the harder it will be to qualify since issuers will look for good credit.
Rewards credit cards
These are perfect for those who wish to earn rewards with their purchases. They come in three types—points, airline miles and cash back. While some people opt for points that can be redeemed for cash and goods, others prefer getting airline miles or cash back rewards.
Travel credit cards
Anyone who loves to travel will like this option, designed to earn more points for traveling, hotel stays, free flights and travel credits. Travel rewards cards usually come with a heftier interest rate and annual fee, but it can be worthwhile if you earn airline miles upfront or convert your points into airline miles, travel cash back or travel rewards. In addition, they will often have a sign up bonus that you can take advantage of.
Student credit cards
This type of card has been specifically designed with college students in mind, and takes into consideration that most young adults won’t have much credit history to show. This option can come with perks such as low interest rates and limited rewards schemes. However, these aren’t as important as the eligibility requirements. In general, students need to be enrolled with an accredited university to be approved.
Secured credit cards
Secured cards provide a great option for those who who want to work towards building credit, or who have damaged their credit. They require a security deposit before the account can be opened, and the credit limit will usually be in the same amount as the deposit made. You can't access the deposit while the account is open or until you transition to an unsecured card, so you will still need to make monthly payments towards the balance on your secured card.
Low interest credit cards
Low interest rate cards are a good choice for anyone wanting to pay off large purchases over time, since the lower rates mean you'll pay less interest in total. Although they usually come with an annual fee, the cost is more than offset by interest savings.
Alternatives to credit cards
If you’ve had financial problems in the past, borrowing money can be a tricky business and it usually means that your access to financing is limited. This may be one of the reasons why a credit card may not be the best for you. However, if you really need to borrow money or use a convenient and secure payment method, consider these alternatives:
- Buy now, pay later services. If you are concerned with your ability to manage a credit card, buy now pay later services offer a way to buy to buy the things you want with a fixed repayment plan.
- Personal loans. Generally, the biggest difference between a credit card and a personal loan is the fixed repayment term. Unlike credit cards, personal loans don’t provide access to a revolving line of credit. Instead, a borrower gets an upfront sum and is given a time frame during which it has to be repaid in full, usually through a scheduled payment scheme. Personal loans are sometimes preferred since this arrangement comes with a lower interest rate for borrowers with a good or excellent credit score.
- PayPal. This platform is no longer reserved just for payments on online auction websites, but is now also used for sending money to family and friends. It's also highly useful for sending invoices for business purposes and can be used to pay in restaurants, shops and some bus services. It also offers protection for purchases and is accepted by a wide range of online retailers.
- Debit cards. Probably the most used alternative, debit cards provide convenience for spending online, in-store and over the phone, without the need for cash. They won't, however, allow you to spend money you don't have, since they access the cash you have in the bank account they're linked to. Using a debit card makes it easier to stay out of debt.
- Prepaid cards. You can buy a prepaid Mastercard or a Visa, already loaded with cash, to use in physical retail stores or online. You may also top them up with more cash through a bank transfer or in person at a bank. Prepaid cards are a great substitute if you need to be able to withdraw and pay without incurring too many fees.