If you’re looking for a new credit card this week, you may want to know which credit cards have the highest-value welcome bonuses right now. This week, these cards have the highest credit card offers by category. Keep in mind that annual fees and additional benefits will vary, often significantly, so weigh the pros and cons of a particular card beyond just the bonus before you apply.
How Do Credit Cards Work?
A credit card can be used to make a purchase of goods or services in-person or online. When you apply for and are approved for a credit card, you’re given a line of credit based on your credit score and other factors like your income.
A potential advantage to using a credit card over paying cash or a debit card is that a credit card functions like a short-term loan. By using a credit card, you have until the end of the credit card billing period (also known as a grace period) to pay what you charged to the card. You can also earn cash-back or travel rewards with some types of cards, along with extras like purchase and travel protections. The downside is that if you don’t pay the entire amount that you charged to your card, you’ll accrue interest on your purchases which can be expensive over time.
How Do Credit Card Points Work?
When you make a purchase on a rewards credit card, you’ll earn a percentage back on your spending as either cash back, points or miles depending on the type of card and what type of rewards it’s offering. Airline credit cards, for example, typically earn miles, cash-back cards earn cash that can be used as statement credits or direct deposits and general purpose rewards cards may earn points that can be used for a variety of redemptions including travel, merchandise or other options.
Some rewards credit cards will earn the same flat-rate back on all spending, like a card that earns 2% back on every purchase. Others have tiered rewards where a certain type of purchase, like gas or groceries, may earn at a higher reward rate than other types of purchases. Before choosing the best credit cards for your needs, consider your spending habits and the type of rewards you’ll get the most benefit from and then compare it to other various options available to you.
How To Maximize Credit Card Rewards
Maximizing credit card rewards can be done both while earning and redeeming.
To maximize the number of credit card rewards you earn, choose a credit card that offers strong earnings on the types of purchases you make most. Cards with category bonuses in groceries, gas or travel might allow you to earn 3% or more on eligible purchases. If your purchases are all over the place, you may do best with a flat-rate 2% cash-back card.
You can also maximize the value of your credit card rewards when redeeming rewards. Most importantly, you should focus on rewards that match your goals—whether that’s airline miles, flexible points, cash back or other rewards. Then, compare redemption options to see if any in particular are worth more. The best redemptions typically yield a minimum of 1 cent per point.
How Does Credit Card Interest Work?
Most credit cards calculate interest using the average daily balance method, which means your interest is compounded and accumulates every day, based on your daily rate of interest. In other words, every day your finance charges are based on the balance from the day before.
How To Calculate Credit Card Interest
The daily rate of interest is determined by dividing your card’s APR by 365 to find the daily rate of interest and then multiplying that number by your balance. For example, to determine the average daily balance on a card with a $10,000 balance on the first day of the billing cycle and an APR of 17%, you’d divide 17 by 365, which equals a daily rate of 0.0466%. This means the next day, your card would have a balance of $10,004.66, which is what you get when you multiply the balance of $10,000 by 1.000466.
How To Apply for a Credit Card
In general, there are several steps to applying for a credit card:
- Check your credit score through a credit card issuer or by ordering it from one of the three main credit agencies.
- Once you know where you stand with your credit score, decide which type of card will be the best for you based on what you’re planning to use it for. Credit cards typically fall into one of three categories: rewards, low APR and credit-building.
- Choosing the best credit cards may be difficult, but applying for the card you’ve chosen is easy. Ways to apply for a credit card:
- Via online application
- By phone, working with an agent
- By mailing a paper application
- By visiting a financial institution to apply in-person
How To Get Preapproved for a Credit Card
Many issuers will let you check to see if you’re pre-qualified for any of their cards before you formally apply. Keep in mind that pre-qualification doesn’t ensure approval and should be considered more of a best guess.
Checking whether you’re pre-qualified is often as easy as entering your name and address on the card issuer’s website and then perusing offers, if any, that are available to you. These preapproved credit cards make it easy to check if you’re likely to be approved in advance.
How To Improve Your Credit Score
There are several steps you can take to improve your credit score. First, check your credit report to make sure there aren’t any errors that could have an adverse effect. Paying your bills on time, every time will have the single biggest impact on your score. After payment history, the next biggest factor in your credit score is the amount of debt you have. Since credit reporting agencies don’t have your income information, they use something called credit utilization instead of a debt-to-income ratio.
Credit utilization is the amount of debt you owe relative to the amount of credit you have. So if you have a balance of $3,000 on a card with a $10,000 limit, you’re using 30% of your credit. Total credit utilization is based on the aggregate amount across all your lines of credit, both what you owe and how much you have available. It’s typically suggested that utilization of 30% or below should be the goal.
What Are the Three Credit Bureaus?
There are three major credit bureaus in the U.S.:
- Experian
- Equifax
- TransUnion
Each of these agencies may use a slightly different method of evaluating your credit behavior, so it’s not uncommon to have a slightly different credit score with each agency. All three companies serve the same function: To analyze your credit behavior to generate a three-digit credit score used to determine your creditworthiness and in turn, the rates you’ll be offered on loans like a credit card or a mortgage.
What Credit Card Should I Get?
Different types of credit card users will benefit most from different types of credit cards. Here are some tips to help you decide what’s the best credit card for you.
Value Shoppers
Value shoppers will likely benefit most from cash-back cards that provide rewards on everyday purchases. These cardholders will want to minimize annual fees and aren’t concerned about travel rewards or high-end perks. Check out the best cards for shopping and best cards for groceries to learn more.
Travelers
The best travel credit card of 2024 will vary based on the kind of traveler you are. If you like to play license plate ABC, check out our best cards for road trips. If you prefer your travels at 35,000 feet, check out the best airline credit cards of 2024.
Credit Builders
When you’re just starting out, it can feel like a Catch-22. You need good credit to get a credit card, but you need a credit card to build good credit. Fortunately, there are some cards out there that are good for both those starting out and those needing to get back on track. Check our best first credit cards and best cards for rebuilding credit of 2024 lists to learn more.
Students
College students have a plethora of credit card options because the banks understand the value of a lifetime customer. Many of these cards act as little siblings to their rewards card counterparts, giving students a chance to earn rewards without needing as much of a credit history. Check out these best credit cards for students.
Business Owners
Whether it’s a roadside stand or a shop on Etsy, small businesses have unique credit needs. Business credit cards offer benefits tailored to commerce and offer a way to keep personal and business expenses separate. If you are just starting out, one of our best cards for new businesses of 2024 may do the trick. If you operate an established business, even if it’s a side hustle, check out our best business credit cards list to learn about your options.
Types of Credit Cards
Although all credit cards can be used to make purchases, there are several different types of credit cards, each designed for a different goal.
Rewards Credit Cards
A rewards credit card is one that earns a percentage back on your spending, in the form of cash back, points or miles. The exact amount you’ll earn back can vary greatly by card with some earning the same flat-rate back on all of your spending and others offering tiered rewards with certain purchase categories earning elevated rates over other categories. See our list of the best rewards credit cards of 2024
Balance Transfer Credit Cards
A balance transfer card is one that offers a low or 0% APR for transfers made to the card for an introductory period of time. After that introductory period, the card’s standard variable APR will typically apply. There may be a balance transfer fee to shift debt to a balance transfer card, usually 3% to 5% of the amount being transferred. See our list of the best balance transfer cards of 2024
0% APR Credit Cards
A 0% APR credit card is one that offers an introductory 0% interest period on either new purchases, balance transfers from other cards or both. Think of a 0% APR offer like an interest-free loan with an expiration date. If used responsibly, it gives you a cushion of time to pay off what you owe without accumulating additional finance charges. But the zero-interest period of time doesn’t last forever. When it expires, your balance will accrue interest at the card’s standard variable rate. See our list of the best 0% APR credit cards of 2024.
Low Interest Credit Cards
A low interest credit card is one that has a low ongoing interest rate, typically far lower than the industry average APR on other cards. For those who regularly carry a balance on their cards, this may be a more beneficial option than a limited-time 0% card since the low rate will not expire after a few months.
Student Credit Cards
College student credit cards aren’t actually different from other credit cards. They’re just marketed towards college students or others with thin credit files who may otherwise have a challenging time being approved for a credit card.
A student credit card, which is a first credit card for many, will typically have more forgiving underwriting standards than a card designed for those with good credit. This means you’re likely to qualify with a lower credit score than the standard version of the card would require. Some college credit cards even offer some perks like rewards and cash bonuses for good grades. See our list of the best student credit cards of 2024.
Credit Cards To Build Credit
When you’re just starting out with credit or you’re seeking to move past credit missteps, there are credit cards aimed at helping you prove responsible payment behavior, and in turn boost your credit profile. The best starter credit card for you will provide a balance between benefits, such as reporting to the credit bureaus and helping to raise your credit score, and costs to carry, including annual fees or any other maintenance costs.
How To Choose a Credit Card
Choosing the best credit cards for your particular circumstances should be based on a combination of factors including your credit score, your tolerance for annual fees, what perks you might be seeking and how any rewards fit with your spending habits.
Credit Card Companies
Credit Card Issuer
A credit card issuer is the bank that issues, or approves you for, the card you’re applying for. Some credit cards have the issuing bank as part of their name, like Chase or Citibank. Others work behind the scenes as the issuing bank for credit cards that may not be part of a traditional financial institution, like Chime or Upgrade.
Credit Card Networks
Card networks process the payments between the buyer and the merchant. There are four major credit card networks: Mastercard, Visa, American Express and Discover. American Express and Discover are unique in that they are also card issuing companies in addition to owning a card network.
Co-Branded Credit Cards
A credit card that’s co-branded is one that’s issued in partnership with a certain retailer or service provider. Popular brands like JetBlue, Hyatt and Disney have all partnered with credit card companies to offer cards that earn rewards in their loyalty programs and offer brand specific perks. Typically, a co-branded credit card will offer rewards and or other perks within the brand.
Visa vs. Mastercard
Both Visa and Mastercard are payment processing networks and it shouldn’t matter to you as a consumer which one your card is on when it comes to making a payment. But both cards offer perks and benefits specific to their brand and type of card within the brand. You shouldn’t choose a card based on the issuing network however. Instead, think of any extras offered by the payment networks as a bonus, with the focus on the main features of the card itself.
For example, a traditional Visa or Visa Platinum card may offer roadside dispatch services and lost card replacement assistance. A Visa Signature card may offer these benefits plus travel insurances and protections. Each individual Visa card will come with different benefits based on the type of Visa and the perks selected by the issuing bank to include.
The same holds true for Mastercard: There are different types of Mastercards with varying perks and benefits depending on the type of Mastercard.