Choose the Right Credit Card with Rewards
Want a better charge, cash-back or rewards card? These websites will help you make the right choice — and save big bucks.
When Americans do something, we do it big. Just look at our love of plastic. U.S. consumers carry around some 1.4 billion credit cards—stack them up, and they'd stretch as high as 13 Mount Everests. So it only makes sense to pick not just any card, but one with lower interest rates, better rewards and minimal fees. Problem is, there are so many choices out there it can be hard finding the right card for your budget, spending patterns and lifestyle. That's where a handful of info-packed, user-friendly websites come in. We spoke with several personal-finance experts to get the inside scoop on the top online contenders. All of these sites will help you winnow the field, avoid tempting offers that could lock you into a bad deal, and get you some nifty perks to boot.
With more than 1,700 cards in its database, this site offers consumers the widest array of choices, from large multinational banks to community credit unions. That's because in addition to "sponsored" cards—those whose issuers pay websites each time someone applies online—NerdWallet includes non-sponsored cards as well. The vast selection also makes it easier to find cards with higher-than-average rewards programs and lower-than-average interest rates. "If you're looking for a site that's uncluttered and a snap to use, this is the place," says Carmen Wong Ulrich, CNBC's personal finance expert and author of The Real Cost of Living (Perigee). "NerdWallet asks you simple lifestyle questions—whether the card is for personal use or for business, if you'll pay in full each month, what kind of rewards you want. It does a quick search and presents you with a list of options." But if you don't feel like answering questions about yourself, click on "Our Best Picks," which will take you to a short list of a dozen or so cards, along with a summary explaining why they stand out.
People who tend to be overwhelmed by too many choices will love this site, which focuses on a smaller universe of about 100 sponsored-only cards from major issuers, including American Express, Discover and Capital One. You can customize your search by selecting the specific features you want (no annual fee, cash back, airline miles), or look for cards according to your credit rating (excellent, good, fair, poor or bad). The description of each card includes an expert review and an overall rating of one to five stars. "I like Credit.com because it gives you an approximation of your credit score for free," says Jean Chatzky, the Today show's financial editor and author of books like Money 911: Your Most Pressing Money Questions Answered, Your Money Emergencies Solved (Harper). "All you have to do is answer six questions and you get an instant calculation. That's the kind of information you need to factor in to make a smart choice."
No one wants to get hammered by sneaky interest rate hikes, late charges and other penalties. And you don't have to, says financial guru Suze Orman, who recommends CreditCardConnection.org. The site lists nearly 1,000 cards, all of them issued by credit unions. "These programs generally don't hit you with the same fees that the big banks do, which is why consumers should check it out," says Orman, author of The Money Class (Spiegel & Grau) and host of her own show on MSNBC. Just enter your zip code, and up pops a list of credit unions in your area; click on any link to go directly to that institution's website. All top-rated cards are guaranteed to have no annual fee, zero balance-transfer fees, and no annual percentage rate increases if you're late on a payment. Other helpful features include the Dean's List (credit unions that have earned the highest, five-star, rating) and the Detention List, which advises consumers which major credit card companies they should steer clear of.
This longtime credit-card evaluator—it's been a leading consumer resource for over a decade—is another of Chatzky's favorites. Choose from among 34 search criteria on the detailed toolbar, and with just one click this site sorts through more than 1,000 cards to single out the very best ones within those parameters, along with an unbiased opinion on each. LowCards also has an A-to-Z index with the current interest rates of every card on the market. You can also use a secure application to apply online for most cards on the site. "It's great for sorting cards by your specific need, whether that's a low introductory interest rate, a business charge card or one with hotel or travel rewards," says Chatzky. "The reviews are very straight-up about the pros and cons, as well as what kind of credit score you need to qualify. They hit all the bases."
The days of the good old magnetic stripe may soon be over. Companies are starting to roll out a new generation of high-tech cards, complete with batteries, microprocessors and more. Citibank recently released its 2G bank card, which lets consumers select whether to pay with credit or rewards points with the push of a button. By the end of the year, MasterCard plans to introduce a version that displays your balance on a mini LCD screen—but only after users enter their PIN on a keypad. "You'll have to do a lot more typing with these smart cards, but requiring that info will beef up security," says Avivah Litan, a vice president at Gartner Inc., a tech research firm based in Stamford, Connecticut. But she predicts we'll evolve far beyond that. "In the future even phones will be used as credit cards—just wave it at the cash register and you're good to go."
119: Average number of times a person uses a card each year
20 billion: Number of credit card transactions each year in the US
$88: average transaction
Originally published in the November 1, 2011, issue of Family Circle magazine.