Additional credit card research
How do you know what card to apply for? If you’re looking for any easy way to compare the best credit cards, check out our search tool below:
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Credit card pro tips
Among the common questions we try to answer are “What are the benefits of a credit card” and “What are points on a credit card?” Both the former and the latter can vary based on which card you’re talking about, so we’ve done our best to cover these subjects in broader detail.
Although the best credit cards offer a slew of obvious benefits including cash back and travel rewards, other perks aren’t always advertised prominently. Examples include:
- Zero liability for fraudulent purchases
- $0 foreign transaction fees
- Rental car coverage
- Free FICO® Score
- Extended warranties
- Roadside assistance
You might have to dig deeper to find them, but these features can truly come in handy. If used correctly, they can even help you save money, travel safer, and protect yourself from undue risk.
Understanding points and other rewards
Rewards come in a variety of flavors — points, miles, cash back, etc. — and it always pays to understand how these rewards work from card to card. To do that, you’ll need to hit the fine print.
Take this for example: You might see that a particular airline card offers the first checked bag free on every flight. It’s a great perk, but without scrutinizing the fine print, you might not learn that cardholders also get checked baggage insurance, car rental loss and damage insurance, discounts on eligible in-flight purchases, or other goodies. If you aren’t aware of all the features, you probably won’t get the maximum benefit from even the best credit card.
Always treat your card like cash
Sometimes emergencies happen. We get it. But unless the situation is dire, you should never use available credit to justify making a purchase. Try your best to restrict card use to purchases that you can afford to pay off in the same month. Otherwise, you could seriously jeopardize your long-term financial health.
When should I pay off my credit card bill?
Always strive to pay your credit card balance in full by your statement due date. There’s no better way to build a solid credit history and healthy credit score.
Credit is a powerful tool when seasoned with self control, but left unbridled, it can wreak havoc on your financial future. Case in point: The average American household has $16,000 of credit card debt. If your card has an 18% APR and you’re only making the minimum payment (usually around 3% of the total balance) you’ll rack up over $2,000 in interest charges every month and continue to lose ground.
Paying your credit card off in full also helps to keep your credit utilization ratio low. Your credit utilization ratio is the percentage of your available credit that you have used. Credit bureaus use this metric to gauge how responsible you are.
When it comes to credit utilization ratio, low is best. Credit cards can negatively affect your credit utilization if you continuously run large balances.
We recommend keeping your credit utilization for each credit card below 30%. You can track your credit utilization on your credit card with some simple math — (balance ÷ credit limit = ratio).
Most card issuers report your balance and activity to the credit bureaus once per month. The problem is that the report might be issued before your monthly statement is due. So even if you pay your card in full each month, it will appear to credit bureaus that your utilization ratio is higher than it actually is.
If you’re committed to keeping your credit utilization ratio low, call your credit card help line, ask when your credit activity is reported, and make sure to pay your balance before that date. (Paying off charges immediately isn’t a bad idea either.)
What credit card should I get?
It all comes down to your everyday spending habits. Ideally, you want a card that rewards those spending habits rather than one that forces you to adjust how you purchase things. These cards we’ve covered are some of the best on the market and a great place to start.
Further reading: The Simple Dollar’s guide to choosing a budget.
Can you ask for a lower rate on your credit card?
Yes, you can. In fact, a survey of 952 American cardholders found that 69% of people who asked their credit card issuer for a lower interest rate were successful. What’s equally as interesting is that only 25% of people ever take the time to try.
Your interest rate isn’t the only thing you can haggle over. Late payments, annual fees, and credit limits are fair game too. Of all the survey participants who asked:
- 87% got a late payment fee waiver
- 69% got a lower interest rate
- 89% got a higher credit limit
- 82% had their annual fee waived or reduced
Here’s how to lower your interest rate
Negotiating better rates doesn’t have to be scary. Follow these three primary tactics to improve your chance of success:
- Leverage your loyalty. It’s simple: Companies are more willing to work with longtime customers. Your best play is with the company you’ve been doing business with the longest.
- Do your homework. Find a better deal and use it to your advantage. Credit card companies need your business. Remember: Over half of the people in the survey scored a better rate simply because they called and asked.
- Be persistent. You probably shouldn’t call day after day, but there’s nothing wrong with a little persistence. If at first you’re told “no,” ask to speak to a manager.
Is it better to have a zero balance on a credit card or close it?
Just because your card has a zero balance doesn’t mean you should close it. Before you take action, consider the impact that closing your account might have on your credit score.
How credit utilization affects your credit score
There are five factors that influence your credit score: payment history, age, mix of credit, inquiries, and your credit utilization — which can impact up to 30% of your score. Credit utilization (sometimes referred to as your credit utilization ratio) represents the percentage of your available credit that is currently active.
Imagine you have two credit cards with a total credit limit of $20,000; one with a $5,000 limit and another with a $15,000 limit. On the first card, you have a $3,200 balance, and on the second you have a $0 balance because you just paid it off.
Right now, your credit utilization is at a healthy 16%. If you cancel the second card, your total credit limit will drop to $5,000 and your credit utilization will rise to a whopping 64%. That’s important, because experts say that once your utilization ratio exceeds 30% your credit score may be at risk.
Should I close my card?
It all boils down to how comfortable you are weathering a drop in your credit score. Canceling a card won’t necessarily sabotage your credit report, but we recommend avoiding any scenario that puts your credit at risk before applying for a mortgage, car loan, or apartment. Otherwise, you might not score the best interest rate possible.
How can I raise my credit score?
If you’re eyeing one of the best credit cards on our list, but your credit score isn’t quite there yet, don’t fret. There are steps you can take to improve your credit score.
First, you need to understand what goes into a credit score. FICO® develops their credit scores based on the following criteria:
- 35% payment history
- 30% amounts owed
- 15% length of credit history
- 10% new credit
- 10% credit mix
As you can see, more than two-thirds of your credit score is composed of how much you owe and how diligently you’re making payments. This means that two of the most important things you can do to improve your credit score are to pay off your balances in full and on time each month.
Amounts owed refers to your credit utilization, which is a measure of how much you owe across all debts compared to your total credit limit. In general, you should only be charging about 30% of your total credit limit at any time.
The payment history refers to whether or not you’re paying on time or missing a payment altogether. Missing even one payment could stay on your credit report for up to seven years, so be sure to set payment reminders.
Credit scores don’t improve overnight, but by reducing the amount of debt you have and making payments on time, you can start to move the dial in the right direction.
Here are the Best Credit Cards of 2018
- Chase Sapphire Preferred® Card
- Discover it® – 18 Month Balance Transfer Offer
- Blue Cash Preferred® Card from American Express
- Blue Cash Everyday® Card from American Express
- BankAmericard® Credit Card
- Capital One® Quicksilver® Cash Rewards Credit Card
- Bank of America® Cash Rewards Credit Card
- Starwood Preferred Guest® Credit Card from American Express
- Discover it® Miles
- Ink Business Preferred℠ Credit Card
- Ink Business Cash℠ Credit Card
- The Business Gold Rewards Card from American Express OPEN
- Discover it® for Students
- Discover it® chrome for Students
- Capital One® Secured Mastercard®
- Journey® Student Rewards from Capital One®
- Indigo® Platinum Mastercard®
- Credit One Bank® Unsecured Platinum Visa®
- Milestone® Gold Mastercard®