What’s the Best Credit Card for You? Here’s How to Choose the Right Card

This story is part of Power Money Moves, CNET’s coverage of smart money decisions for today’s changing world.

With so many credit card options to choose from, trying to find the best one for your financial goals isn’t always easy. Each credit card comes with its own benefits and features, so it can feel like you’re comparing apples to oranges. Plus, with rising interest rates and record-high inflation, you’ll want to get the most out of your credit card while also avoiding pitfalls and penalties.

Many credit cards offer cash back, welcome bonuses, financing opportunities, purchase protections, travel insurance, annual statement credits and other perks. But these cards can also easily get you into debt, tank your credit score and subject you to paying thousands of dollars in interest. When you’re choosing a credit card, evaluate your risk tolerance and consider your spending behavior and budget. 

We’ll walk you through how to define your money goals and sift through card options, so you can find the credit card best suited to your financial situation.

First, know what you want your credit card to do

If you’re trying to keep the number of credit cards in your wallet manageable while still taking advantage of perks, you’ll need to prioritize. Here are some of the common financial goals people want to see with their credit cards. 

Improve or build your credit

One of the basic rules of the American financial system is that having a strong credit score can help you open many doors — but bad credit can close them, too. If you’re considering buying a house or a car, having good credit will help you get the best loan terms, which means your loan could be less expensive overall. If you’re planning to rent an apartment, apply for a new job or get a cellphone contract, your credit score may be the difference between getting approved or denied. 

Having an open credit card account on your credit report and using it frequently in a calculated way — paying your bill on time every month and using less than one third of your available credit — is a surefire way to build and maintain strong credit. 

There are cards designed specifically for those with bad credit or fair credit. These cards may have less frills than rewards credit cards, but they can help you build your credit so that you can qualify for better features in the future.

Alternatively, secured credit cards are available for people with credit problems. You submit a security deposit as collateral, which will amount to your available credit. After a few months of responsible use, some secured cards allow you to “graduate” to a traditional credit card and get your deposit back.

Save money on everyday essentials

If your goal is to stretch your budget, a rewards credit card — which can earn you cash back, points or miles — is the way to go. These cards give you a small percentage back on every purchase you make. For example, the Capital One Quicksilver Cash Rewards Credit Card offers at least 1.5% cash back on every purchase.

Meanwhile, some cards offer multiple categories for earning elevated rewards rates. Others, like the Discover it® Cash Back*, may offer rewards categories that change over time. Rewards categories may emphasize different parts of the average budget, such as groceries, gas, restaurant dining and more. Some people even mix and match several cards throughout their regular spending to get the highest rewards rates on each transaction.

Fund your next vacation

As inflation pushes prices higher, the costs of travel increase, which includes airfares and hotel rooms. A travel rewards credit card can help you save on your next trip and allow you to earn points or miles on every purchase you make, often with elevated rewards on travel purchases. 

Some of the best also offer benefits to enhance your travel experience, like access to airport lounges, priority boarding, free checked baggage or late hotel checkout. If you’re a brand loyalist, you can get even more specific — and often higher value — rewards with a hotel credit card or airline credit card. These can net you free night stays at the hotel chain and discounts on in-flight purchases, respectively, as well as other perks.

Consolidate debt or finance a large purchase

Some credit cards offer zero-interest introductory promotions for a period of time, usually between 12 and 18 months, giving cardholders the flexibility to pay for purchases during that window without incurring interest — as long as the minimum payment is made on time each month. An intro APR credit card can help you finance a large or unexpected expense, from a new computer to a minor remodeling project. 

For example, if you were to apply for the Chase Freedom Unlimited® card, which offers a 0% introductory APR on purchases and balance transfers for 15 months (18.74% to 27.49% variable APR thereafter), you can split up your payments over that time frame without racking up interest — as long as you make the minimum payments before the due date. So if you were to purchase a $2,000 computer during your first month, you would have the remaining 14 months to pay off the computer without accruing interest. Spreading the payments out evenly over that time period, you would owe roughly $145 per month to pay the computer off in full. 

The key is to budget your purchase and pay installments before the introductory zero-interest promotion lapses — and make sure the whole amount is paid before the promotion ends. Otherwise, you’ll have to pay interest on any remaining balance on the card. 

In the case of the Chase Freedom Unlimited, any balance left on the card beyond the initial promotional period will be subject to an 18.74% to 27.49% variable APR, depending on your credit. Credit cards notoriously charge high interest rates, so we recommend not leaving a balance you can’t pay.

If you’re looking to consolidate debt on high-interest credit cards, you can move your balances onto a balance transfer credit card that offers a similar 0% introductory APR. This will allow you some interest-free breathing room during a promotional period so you can more easily pay off existing debt.

Don’t overlook welcome bonuses

One of the best ways to rack up points or cash back is to apply for a new credit card with a generous welcome bonus. In order to earn the bonus, you typically have to spend a certain amount of money on the card within the first months after you get approved for the card, usually between three and six months.

For example, with the Chase Freedom Flex℠, you earn a $200 bonus after you spend $500 within the first three months of opening your account. Welcome bonuses and their spending thresholds vary widely across credit card types. Typically, cards with higher annual fees offer more valuable welcome bonuses.

Before jumping on the juiciest sign-up bonus you can find, check your monthly spending and make sure that you’ll be able to meet the threshold without overspending. You don’t want to go into debt to earn a welcome bonus.

Be mindful of annual fees

As you look for credit card options, one important aspect you should consider carefully is the annual fee. Many great credit cards charge no annual fee. Other cards, however, do charge annual fees — some can be hundreds of dollars. You’ll want to make sure you can afford the annual fee and that the card will offer you enough value over the course of the year to offset it.

To help you break it down, we suggest you create a list of the monetary value of the benefits compared to the annual fee to help see if you’ll come out ahead, break even or potentially even lose money. You’ll want to have a good understanding of your budget before you sit down to make calculations.

Find benefits that go deeper than rewards

Search beyond the cash back or points and spend some time learning about the credit card’s benefits. Some of these extra perks and benefits alone might make a particular card compelling. You’ll have to check the fine print to know exactly what your credit card offers. 

Rental car insurance. Some cards offer primary rental car insurance, which means the card company will cover you in the event the rental is damaged or stolen. Other cards only offer secondary rental car insurance, meaning the company will cover anything not covered by your own car insurance. In either case, you can skip the car rental insurance offered for an additional charge by the rental agency.

Trip cancellation or interruption insurance. If your trip gets canceled or you have to interrupt it for an eligible reason, your credit card may reimburse you for nonrefundable expenses purchased with the same card up to a specific amount, such as your flight or hotel accommodations.

Purchase protection. Some credit cards will cover any purchases made with the card that get accidentally damaged, stolen or lost. Purchase protection reimbursement amounts vary from card to card, and they usually come with a fair amount of restrictions and exclusions.

Extended warranty. Cards that offer this benefit usually extend the life of the warranty of purchases made with the card. Similar to purchase protection, this benefit usually comes with multiple exclusions and restrictions, so make sure to read the fine print when shopping for options.

Cellphone insurance. If your phone dies, breaks or gets stolen, your credit card might cover its repair or replacement as long as you pay your cellphone bill with the card. Cellphone insurance usually is based on a certain coverage amount per claim or a maximum per year, with a cap on the number of claims you can file per year. However, this benefit might help you save money by not having to pay for cellphone insurance through your mobile carrier.

Secure shopping. With identity theft and data breaches on the rise, credit cards offer several ways to protect your data when you shop, either in-store or online. The easiest way to shop more securely with your credit card at brick-and-mortar stores is by using the contactless option, which is now widely available in the US. When you “tap” to pay, your credit card creates a one-time code that transmits your card number to the payment terminal, making it very difficult for the personal information on your card to be stolen.

Virtual card numbers. As physical credit cards have become more secure, online credit card fraud has risen. Entering your credit card information online, especially on websites you’re not familiar with, can be risky. 

To mitigate risk, you can use a virtual credit card number. Some credit card issuers give you the option to create virtual numbers for your physical credit cards, which can be used online. Virtual credit cards create a placeholder number in lieu of your card’s actual number that can typically be used just once and then expire.

Stay safe when using a credit card

One way to prevent identity theft is to freeze your credit reports. All three major credit bureaus, Equifax, Experian and TransUnion, offer the ability to freeze your credit for free. Freezing your credit report will prevent anyone from opening a new credit account in your name or accessing your credit report. It’s a great way to ensure no one can stick you with a bill that’s not yours, but there’s a trade-off. 

Every time you apply for a new credit account — from a credit card to a mortgage or a personal loan — you’d have to temporarily unfreeze your credit until your application has been processed. You’ll have to do this for each credit bureau, but the process is surprisingly quick and can be done online.

If you’re denied for a credit card that offers your ideal benefits, you may have to start small and work your way up to earning better rewards and perks. For more advice on how to make the most of your money, consider this inflation-proof savings strategy to help grow your cash reserve.

*All information about the Discover it Cash Back has been collected independently by CNET and has not been reviewed by the issuer.

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