Best Credit Cards for January 2020

A credit card can be a great way to build credit, earn rewards on every purchase, and even avoid interest charges on purchases and balance transfers. We’re working to make selecting a credit card as easy as buying a new pair of socks. Below, you'll find our recently-released shortlist of top picks for 2020 along with essential education to help you manage credit cards the right way.

Though there are many different credit cards out there, virtually all card offers can be divided into five different categories based on their features and rewards programs. The first thing you should do when shopping for a credit card is to narrow the list of possible matches by picking a certain feature or functionality that is particularly important to you.

The five types of credit cards are as follows:

0% APR credit cards

These cards offer 0% intro APRs on purchases and/or balance transfers for periods as long as 21 months, allowing you to carry a balance without paying double-digit interest rates during the promo period. These credit cards are best for people who will carry a balance since a 0% intro APR card can potentially save you hundreds (or even thousands) of dollars in interest. If you’re looking for this type of card, check out our list of the best 0% APR credit cards.

Cash-back credit cards

These are the most common types of credit cards out there. Cash-back credit cards give cardholders rewards equal to a percentage of their spending, typically ranging from as low as 1% all the way up to 10% for spending in certain bonus categories. The beauty of cash back credit cards is that you can redeem your rewards for cash to use however you’d like. Many people redeem their rewards for statement credits, which reduce the card’s balance. You can think of a 1.5% cash back rewards card as a card that effectively gives you a 1.5% discount on everything you buy. If cash back is your goal, check out our list of the best cash-back credit cards.

Travel credit cards

These cards typically accrue rewards in terms of miles or points for every $1 you spend and can be redeemed for flights, hotels, rental cars, and more. Travel cards also tend to have other perks (such as no foreign transaction fees when used abroad) that 0% APR cards and cash-back cards are less likely to have. Frequent travelers, especially international travelers, would be wise to have a travel credit card, if only for the benefit of avoiding foreign transaction fees.

The best credit card offers for new cardholders are typically travel cards for people who have high incomes and excellent credit histories, due to their lucrative sign-up bonuses. For the best of the best when it comes to travel credit cards, check out our round up of the top travel cards on the market.

Secured credit cards

These are designed for people who have no credit history, or bad credit. A secured credit card acts just like an ordinary unsecured card, but it requires applicants to put up collateral to open the account. These cards report to the big three credit bureaus just like any other credit card, making them a great entryway into the world of credit. They’re also useful for rebuilding from a bad credit score. If you’re looking to rebuild or build credit, here is our round-up of the best secured credit cards.

Business credit cards

Designed for business owners and managers, these cards typically offer higher credit limits and rewards programs that pay out bonuses on company expenses like online advertising, cable or phone bills, internet and utilities, office supply stores, and others.

Business cards are great for small business owners who want to separate their personal expenses from their business expenses while building a relationship with a bank that will help their business qualify for other types of financing later. Our list of the best business credit cards can help point you in the right direction if you need a business credit card.

Cards offer rewards in two general forms: cash back or points. Here are a few things to help decide which is best for you:

• For frequent travelers, a points-based rewards card might deliver the most value. In addition to miles or points that can be redeemed for flights, hotel rooms, and more, these cards often come with other travel-specific benefits such as no foreign transaction fees or free checked bags on a specific airline.
• If you aren't a frequent traveler, a cash back rewards card may be best. There are two basic types: flat-rate and category-based. A flat-rate cash back card gives you the same earnings rate on all purchases, while a category-based cash back card gives you better rates on certain types of purchases. For example, a card might pay 1% back on most purchases but 3% on gas and restaurant purchases. If you spend a significant amount of money on a high-earning category, that's often a good reason to choose one card over another.
• Some points-based credit cards allow you to redeem rewards for cash but at a lower rewards rate, so be sure to check out the specific redemption rules if you want the flexibility to choose.

Though more than 70% of American adults have a credit card, they aren’t for everyone. On one hand, they can offer excellent benefits that include rewards on every swipe, big sign-up bonuses, free access to a FICO® score, and 0% intro APRs for new cardholders. But if used to spend beyond your means, a credit card can put you into costly credit card debt that will take months, if not years, to pay off.

You won’t use it irresponsibly

Credit cards are not free money. If used responsibly, you’ll never pay a dime in interest or fees by using a credit card. That means making sure that you always pay your balance in full each month by paying the “statement balance” reported on your statement. Carrying a balance is a really good way to get into financial trouble since balances are assessed interest at rates in the double digits.

You can manage another due date

Failing to make payments on time and in full can result in paying late fees and interest charges. If a payment is more than 30 days late, it can negatively impact your credit score, too, doing more harm than good. Don’t use a credit card if you’re an especially forgetful person.

You have predictable, recurring income

Credit card companies require that your household have some kind of income in order to approve you for a card, but having income is also important for avoiding credit card debt. Unstable or unpredictable income is one of the biggest reasons people fall into debt.

You won’t need to get a big loan in the near future

If you’re thinking about applying for a mortgage in the next six months, you might want to reconsider applying for a credit card now. People who have thin credit files will see their scores drop after applying for more credit, and may run into trouble explaining their recent credit inquiries. The best time to start building credit is, unfortunately, when you’re least likely to need a good credit score in the next few months.

Credit cards are about more than just borrowing money. A credit card is a useful payment option that offers more convenience and fraud protection, while helping you build the credit necessary to qualify for other loans at the lowest possible interest rate.

Here are a few reasons why it makes sense to use a credit card for your ordinary daily purchases:

Use a credit card to building credit

A credit card is a great way to help you build credit so that you can later qualify for financing to buy a car, home, or another large purchase. Most credit cards report to all three credit bureaus, so having an open credit card account is one of the best ways to start building up your credit report and credit score.

Rebuild your credit with a secured credit card

Late payments or collections accounts can haunt your credit report for seven years, dragging down your credit score the whole time. But having an open credit card account in good standing can help you rebuild your credit by “diluting” the importance of the bad accounts. It also shows that you’re current on your newest obligations, which can help you show lenders that you’re managing your finances better today than you did in the past.

Advanced fraud protection

It’s a simple fact that credit cards offer more fraud protection than debit cards. At the very worst, cardholders are only liable for up to $50 of losses if their credit card is used fraudulently, though most credit card companies simply eat the $50 loss rather than pass it on to their customers. In comparison, the worst case for debit card fraud is that you ultimately lose everything in your checking account (and potentially more if the account is overdrawn or linked to other accounts).

Earn rewards

When used responsibly, a credit card is simply a better way to pay than debit or cash. Think of rewards as an effective discount -- if you use a 1.5% cash back card to make purchases, it’s like getting a 1.5% discount on everything you buy. Over time, even small percentages really add up!

Get extra perks and discounts

Many cards offer perks including free rental car insurance, extended warranties on the things you buy, and price protection, which can reimburse you if something you purchase is advertised at a lower price later. These little-known card perks can easily create hundreds of dollars of value for their cardholders. (You won’t find these perks on the average debit card.)

According to the Federal Reserve’s latest Consumer Credit Report, the average interest rate charged on credit card accounts in the United States is 15.13%, as of May 2019.

However, this is an overall average which includes accounts that charge no interest. For example, many credit cards have 0% intro APRs for 12 months or more, and many store-branded credit cards offer promotional financing deals.

When the data is narrowed down to only include those accounts that are assessed interest, the average is significantly higher at 17.14%. So this would be a more accurate answer to the question of “what is the average credit card interest rate?”

To illustrate what a high-interest form of debt credit cards tend to be, consider that the average APR on a 60-month new car loan is just 5.36% as of May 2019. Even an unsecured personal loan has a significantly lower 10.63% interest rate, on average.

The average credit card interest rate has increased dramatically over the past few years. Here’s a chart that shows the progression of credit card interest rates from 2014 to the most recently available data:

One thing we want to make very clear is that picking the best credit card is a personal decision that should be guided by your financial needs. Though there is a perfect credit card out there for you, there isn’t a single credit card that is perfect for every single person.

Which credit cards are the best depends on the features and functionality you want from your new card. Below, we constructed a table showing you the types of credit cards to pick based on why you want a credit card in the first place.

To recap, here are the best credit cards

Our best credit cards picks by category:

• Best balance-transfer credit cards
• Best cash-back credit cards
• Best cash back credit cards with no annual fee
• Best 0% APR credit cards
• Best travel rewards credit cards
• Best travel cards with no annual fee
• Best airline credit cards
• Best gas and groceries credit cards
• Best no-annual-fee credit cards
• Best credit cards for students
• Best credit cards for excellent credit
• Best credit cards for good credit
• Best credit cards for average credit
• Best credit cards for bad credit
• High limit credit cards
• Best low interest credit cards
• Best rewards credit cards
• Best sign-up bonus credit cards
• Best secured credit cards
• Best business credit cards

Our lists of picks by issuer:

• American Express credit cards
• Barclaycard credit cards
• Bank of America credit cards
• Capital One credit cards
• Chase credit cards
• Citi credit cards
• Discover credit cards
• Wells Fargo credit cards