Rewards cards, cash back cards, travel cards, business cards, gas cards, and a slew of others. Chase Bank’s website alone has over 23 different cards to choose from. Where do you even begin with all of this nonsense?
The world of credit cards can be frustrating and confusing, so we’re here to shed some light on these and help you find the card that’s best for you.
You can get some awesome benefits if you choose the right card for yourself, with just a little bit of information guiding your way. We’ll give you the pros and cons to each card type, and what to avoid altogether.
New to credit cards? Check out our guide on how to use a credit card before you apply for one of these!
What kind of cards are there
If it feels like there’s too many, it’s because there is.
The most used credit cards now days are cash back cards, rewards cards, travel cards, and of course, your standard credit card with no benefits. Besides those 4, there’s some more odd-ball cards, such as Disney rewards cards, gas cards and AARP cards.
There’s not much reason now-days to have a credit card that gives no benefits, so if you’re still using one, I recommend upgrading or applying for a new one.
Did you know? Applying for a credit card will put a hard inquiry on your credit score, but this will only hurt your score by a few points. After a year or two (depending on the loan), this inquiry will fall off. Just make sure you don’t have more than 4 or 5 in your history at the same time, as this will start to hurt your score!
The best credit cards
Cash Back Cards
The most popular by far, cash back cards offer you a percentage back on whatever you spend each month. These cards are great for everyday purchases, and typically have no annual fee.
Cash back cards can range anywhere from 1% to 3% back on purchases, although some require you to spend on certain categories to get the most money back.
It’s basically free money for buying the stuff you’re already buying anyway, such as groceries. Who doesn’t love that?
Our favorite cash back cards
Citi Double Cash Card – The undisputed king of cash back cards. This card nets you 2% back on all purchases made with the card, with decent APR (not that you should be paying interest at all!). To top it off, Citi is a reliable bank that has good customer service.
Chase Freedom Unlimited Card – Much like the Citi card, this one is a great all-rounder rewards card and we highly recommend it for both beginners and avid card users.
U.S. Bank Cash+ Card – Though the standards for approval are a little higher, this can be an excellent choice if you frequently shop at stores that meet the 5% cash back categories. To get the most out of this card, you need to be sure you actually shop at the categories they provide. This one is great for people who frequently buy from large retail stores.
Rewards card are… not that great. OK, not always, but for the most part, avoid them.
Rewards cards work similar to travel cards, as in, when you spend money you’re “rewarded” with points you can later redeem. The problem is, these rewards cards typically come with an annual fee that you rarely ever break-even with. Especially when compared to cash back cards, which rarely have an annual fees.
Let’s look at an example using the Starbucks Rewards Visa from chase.
This card offers you a small reward for all purchases made, and 3x the points for buying stuff at Starbucks. With an annual fee of $50, you’d have to spend over $520 every year, just to break even! And that’s without comparing it to using a cash back card. If you’re going to Starbucks Every. Single. Day.
This might be worth it for you, but for most people, just steer clear.
Don’t trust lenders
Keep in mind, credit card companies are not your friend, and are mostly seeking to manipulate you into spending money you don’t have. Think smart, do the math, and make sure you’re not spending more money, just to get a “reward” that isn’t worth it.
Rewards cards are a lot like that friend who’s always asking you to invest in his next big idea. Once in a blue moon it can pay off, though not much, but you usually just end up wasting your money.
Travel cards work very similar to rewards cards, but unlike rewards cards, they’re actually worth it! Under certain conditions, of course.
With travel cards, you earn rewards points for purchases you make, and bonuses on travel related areas like flights and hotels.
Depending on your travel card, it can also come with bonuses when flying, such as discounts at airport shops, WiFi access on planes and specials on in-flight food and drinks.
Travel cards are meant for those that do just what the name implies, traveling. If you’re on the road, in hotels, or flying on a regular basis, a travel card is usually worth having. Just be careful with the annual fees, as most cards start around $95 per year. Make sure your rewards out weigh the cost of owning the card!
We recommend travel cards for those who’ve got a bit more purchasing power behind them, and not for lower income families or those on a tight budget. It’s safe to assume that if you have a lower credit score, just avoid travel cards altogether.
Our favorite travel cards
Chase Sapphire Preferred Card – The undisputed king of travel cards for most people. Their card has some of the best money-to-point ratio when making purchases. Not only that, they have a fantastic bonus reward for first-time card users, if you can hit the steep $4,500 in purchases in 3 months. Chase also has good customer service, and competitive interest rates. But you’re not carrying over a balance and paying interest, right?
Citi AAdvantage Card – While not as good as Chase’s travel card, it’s still a decent option. The bonus reward for first-time card users is a little less intense at $2,000 in your first 3 months. Where this card does shine, is if you often fly American Airlines, specifically. You get bonuses such as your first checked bag being free, and extra points on AA flights.
Less common cards
Disney Rewards Card
Yet another rewards card.
Disney has partnered with a few different banks to offer rewards for spending money at Disney parks and products. If you’re a Disney freak, you might find some use for this. But for the vast majority of people, just use your cash back card instead.
Amazon Visa Card
Amazon Visa – Not to be confused with Amazon’s Store Card. The Amazon Visa can be used anywhere, like a regular credit card, and offers some nice benefits. You’ll get 1% back on all purchases, 2% in certain categories, and 5% back on all amazon.com purchases.
This card is actually pretty decent. You can get some nice kickbacks if you do a lot of shopping through amazon, and there’s no annual fee. Just don’t be buying things you didn’t need for a small reward.
AARP Chase Credit Card – If you’re a member on AARP, you can apply for member specific cards like this one from Chase. They don’t typically offer better rewards, but they’re often more lenient on application requirements.
If you enjoy making donations, purchases made by this card will have a $0.10 matched donation made by chase to the AARP Foundation for their Drive To End Hunger campaign. Chase has donated $8.3 Million to the foundation since this program began.
While store credit cards such as Home Depot or Lowe’s are usually not that great, they can be an option if you have a plan set up for a large purchase. Often these store cards will have 0% APR on the first 12 months of a purchase, but only if you spend a certain amount.
The highlight of store cards is that they’re one of the easiest to be approved for. If you’re just starting out and have low credit, these are a great option to consider.
You can often take advantage of store cards if you need to make a large, unexpected purchase. Such as buying a $1,000 fridge you weren’t expecting to have to get just after moving into a new home, and don’t want to completely deplete your savings all at once. This doesn’t mean go buy things you can’t afford, it just allows you a slightly safer financial option.
Have you ever found yourself in the difficult paradox of wanting a credit card to build your credit score… only to find you don’t have enough credit to qualify for said card? Well be frustrated no more, this is where Secured Cards come in.
Secured cards are the least known and used cards, but are a great tool for those with low credit scores. Secured cards reduce the risk to the lender by requiring a deposit equal to your maximum credit on the card.
Here’s an example. If you want a card with a $500 credit limit, you must make a $500 dollar deposit before you can have the card. This deposit gives your bank a little bit of extra security for risky users.
Secured cards are a fantastic choice for those who’ve suffered with financial troubles, such as bankruptcy. It’s a risk-free way to rebuild your credit score without having to meet any specific requirements.
Secured cards VS prepaid cards
Both of these cards work fairly similar to one another, in that you must first pay a deposit before they can be used. The differences arise when we get into the details. A prepaid debit card is not reported to your bank, thus, not building your credit. A secured card is reported, and thus, builds your credit score. Secured cards can carry a balance over to the next month, prepaid debit cards can not.
The same process applies to these cards as regular credit and debit cards. Paying with debit is an instant transaction, paying with a secured card is a small “loan” until you pay it off.
To put it bluntly, there really is no reason to use a prepaid debit card over a secured card. If you have the option to build your credit score over not, we always recommend the former. Just make sure to read your card details carefully and avoid getting any cards with an annual fee. You don’t need to be paying money to own your card!
Credit cards are the future, and there’s no getting away from them. While some financial experts encourage people to go cash only, I find this to be ridiculous. Instead, I encourage everyone to be smart about their credit card, and understand how to use one responsibly.
With proper care, there’s really no reason not to have a good cash back card, that has no annual fee. You’ll get some decent rewards, have better security when purchasing online, and easily build your credit score!
As always, be responsible. Don’t let the allure of rewards manipulate you into buying things you don’t need, and never carry a balance on your card. If you follow these simple guidelines, you’ll have an awesome financial tool under your belt and getting cash back in no time.
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