Best Credit Cards of October 2020
At BankingDeal.com, our goal is to empower you make informed financial decisions. We do this by presenting you with companies we feel are qualified to serve you the best. These companies are our advertising partners; however, this does not impact our opinions or ratings.
A credit card is an invaluable financial tool when used correctly. The thin piece of plastic or metal offers purchasing convenience while allowing you to build your credit score when used wisely, which will be needed to secure a better deal on financial aid, such as a mortgage or personal loan. However, misuse of a credit card will hurt your credit score, and may even leave you dealing with debt. Provided you use a credit card correctly, you will never have to carry cash around with you again, and may also find yourself on the receiving end of rewards from the credit card provider, depending on the card.
How can you misuse a credit card? Well, unlike a debit card, which uses your own money, a credit card is attached to a line of credit from your bank. As you make purchases with your card, you borrow from your line of credit. You then need to pay the amount back to the bank, which you can either pay in full each month or at least above the minimum repayment requirement, though any outstanding amount will incur interest against it, meaning more to pay back on your next billing cycle. Generally, the better your credit score, the higher the credit limit tied to your credit card account, along with a lower interest amount on any outstanding balance.
Luckily, you won’t have to search far for the best credit card offers, as you can find them listed right here.
When Is A Good Time to Get A Credit Card?
Now, is the short answer. A credit card is needed to build a credit score, with the duration you have owned the card and your ability to keep on top of your payments, directly impacting your credit score. However, it may not be that simple as there are specific criteria to be met that include:
- You must be over 18 if you wish to get a credit card in your name.
- You will need to provide proof of independent income that is sufficient enough to cover the minimum payments, and annual fee required on the credit card.
- A strong credit score. Credit cards can be catch-22. You need a card to build a credit score, but to get the best offers, you need a good credit score. A student or secured credit card can help you to start building up that score.
The above two options are compulsory for getting a credit card, with the third being preferable. Those three options are not the only things to consider before getting a credit card.
Are You Ready for The Responsibility?
There is a stigma behind credit cards and their ability to lead to credit card debt. However, this stigma is unfounded. You need to use a credit card responsibly. If you understand the fees that come with credit cards such as the interest fee, late fee, annual fee, or balance transfer fee, and have the income to pay back the card issuer each month, then you will have a strong start.
Will You Benefit from A Credit Card?
The answer is most likely yes, as you need that credit score for so many different things including:
- Securing a mortgage
- Securing an auto loan
- Renting a property
Some transactions also require a credit card, such as renting a car or hotel room, as a security deposit can get held on the credit card. There is a chance that without a credit card, you will not have access to such services.
Additionally, another benefit to a credit card is the chance to earn rewards. Your credit card issuer will reward you for using and paying back your credit limit. Reward credit cards allow you to earn cash back, store credit, access to facilities, travel rewards, and more. Some reward cards will enable you to earn unlimited rewards, while others set a limit. You will either receive the rewards directly, such as when you earn cash back for statement credit or have to apply for them through the credit bureaus own program, such as the Chase Ultimate Rewards. Some credit cards also allow you to earn unlimited bonus points, which you can use to get more out of your rewards.
However, if you get a credit card but then never use it, you should watch out for the annual fee, such as the $250 fee that comes with an American Express Gold Card.
Should I Get A Credit Card or A Personal Loan?
A credit card gives you access to money that is not yours. You borrow from the card issuer and then pay it back. A line of credit is not dissimilar from a personal loan. You borrow the money and pay it back monthly with an interest rate applied and late fees if you fail to make the payment on time. The negative impact on your credit score from not paying back either form of financing can affect your access to further financial services. However, though both a credit card and a personal loan are ways to borrow money, they do come with distinct differences that make them suitable for different scenarios.
A credit card will be better if:
- You require a continuous line of credit that you will only be charged interest on if you use it, and fail to pay back the full amount each month. This line of credit can help cover small bills and other daily purchases.
- You can pay off your credit card balance in full each month, thus avoiding the interest mentioned above.
- You need to build up your credit score to secure access to better deals on financial services in the future.
- You already have a strong credit score and want to take advantage of introductory 0% interest rates on a line of credit from a credit card. That same strong credit score can also provide access to beneficial reward schemes.
A personal loan will be better if:
- You need a lump sum of money to cover a significant expense, such as a vacation, or car purchase, or would like to consolidate your debts into one easy to manage package.
- You desire lower interest rates than those that come with a credit card.
- You have a good or excellent credit score, which will allow you to receive the best deals.
- Your current financial situation will allow you to budget for the monthly payments.
What You Should Know Before You Get A Credit Card
A credit card is a great financial tool. It eliminates the need to carry cash, allows you to build up your credit score, and if you have a strong credit score, you can receive unique bonuses and cash back. However, every time you use a credit card for a purchase, you are committing to pay back the borrowed amount. And you may have to pay other fees with the card, even if you don’t use it. For that reason, there are a few things you should know before using the card.
- Credit Cards come with fees – The annual fee gets charged yearly, whether you use the card or not, though not all cards come with an annual fee. The APR is a percentage that you pay on top of any outstanding balance after you have paid the minimum charge. Different services that come with your credit card can charge different APR rates, including your purchases, balance transfers, and cash advances, which is when you use your credit card to withdraw cash from an ATM. Foreign transaction fees can also apply if you use the card abroad, and you will incur late fees if you fail to make your minimum payment on time.
- The first offer is not always the best. Many different credit cards come with varying fees and various bonus rewards, with some offering the chance to earn unlimited cash and bonus points, though the terms can differ from what you see advertised. Don’t commit to the first offer that you find. With help from the above list, find the best credit card for you.
- Don’t commit to a credit card if you can’t afford it – The rule of thumb is that you should only be using about 30% of your credit limit. Doing so will allow you to build your credit score. Over relying on your credit card can quickly lead to debt that you can’t payback.
Further Understanding the Fees and Rates That Come with A Credit Card
It is possible to own a credit card, without paying any fees, though that depends on your ability to secure a credit card with no annual fee, which often requires a good credit score. If you do receive a credit card with an annual fee, you will have to pay that amount to the credit card issuer, whether you use the card or not. The annual fee can range from anywhere between $25 and $500. All other fees are avoidable, provided you use the credit card responsibly.
The APR of the credit card should factor into your decision, even if you intend to pay your monthly balance in full each time. APR on a credit card can come in different variants, with common examples including:
- Purchase APR gets charged on any outstanding balance accumulated from using the credit card to make purchases.
- Cash Advance APR gets charged when you use the card to make cash withdrawals from an ATM.
- Balance Transfer APR is charged when transferring outstanding debt to your credit card. You can consolidate your debt into one package, with a preferable APR than that of the origin of the debt.
- Foreign transaction fees are a percentage charged on top of the amount you use when using your card abroad. The average foreign transaction fee is around 1.5%
The average purchase APR is approximately 21% though the amount can differ from card to card and depending on your credit score. Some cards come with an introductory APR rate, which is lower than the actual, or even 0%, for an introductory period. This introductory rate may only apply to specific functions, such as balance transfers or purchases.
How To Get Preapproved For A Credit Card
When you apply for a credit card, and most other forms of financing, the lender performs a hard credit score check. That check is to see if you are a trustworthy borrower though it will negatively affect your current credit score because you are inquiring about taking on more debt. For this reason, multiple credit card applications will hurt your credit score and lower your chance of getting the best deal.
Pre Approval Online
A way to get around this is by getting preapproved for a couple of credit card options online. The lender performs a soft credit check, which is not as thorough as the hard check and does not guarantee you will receive the credit card, but it doesn’t hurt your credit score. Nearly all of the major credit bureaus, such as American Express, allow you to opt for pre-approval online. You should use this tool to ensure you will meet their requirements before making an official application, as a rejected credit card request, like a hard credit check, will negatively affect your credit score.
Pre Approval In The Mail
If you have never opted out of preapproved credit card offers, then you may find such a proposal come to you in the post. Credit bureaus can take it upon themselves to review your credit history, and then send you an offer that you qualify for, whether you want it or not. Pre-approval in advance might sound like a bonus. However, you have no way of knowing when the proposal was put together for you, and if you follow through with the credit card, you can still find yourself declined, which will hurt your credit score. For this reason, it is best to check online yourself.
Choose the Right Credit Card for You
Different credit cards do different things, with a card out there for everyone. There are even business credit cards. Before you choose any card, you need to consider what you will use it for. There is no point opting for a card that offers bonus reward points on travel if you don’t travel. There are so many credit card companies around, such as American Express, Chase, and Capital One, to name a few, that you should first work out what you need out of the card, before focusing on the card provider.
Reward cards are a vague category of credit cards that contain many options. You should opt for the type of reward card that best suits your lifestyle, to enhance your chance to earn bonus points. If you travel a lot, a travel rewards card, such as an airline credit card or a hotel credit card, is best. If you need a bit more flexibility, general travel credit card rewards are also available.
If the chance to earn cash back rewards or store credit sounds more desirable, then that type of credit card would be the better choice.
Each type of card will have different terms for how you earn points, with some cards only rewarding eligible net purchases. Some reward cards, such as the Chase Sapphire Reserve card, come with a sign-up bonus, which rewards points for a specific action, to help get you started with your point-earning, which you can then spend via their Chase Ultimate Rewards program.
No matter your desire, you must have a good credit score and be prepared for an annual fee, as credit bureaus must cover the unlimited cash back rewards potential. However, you can expect a travel rewards card to come without foreign transaction fees.
It is worth noting that though cards advertise that you can earn unlimited cash back, you may only be able to redeem cash back as a statement credit. The monetary value of your bonus points, when redeemed as a statement credit, are taken from your outstanding balance, meaning you pay less on your next billing cycle.
0% Interest Credit Cards
If you have a large purchase you need to make, then a 0% interest credit card can allow you to make that purchase that you don’t have cash for without having to pay interest back on your outstanding balance for an introductory period. After that introduction offer, the APR of a 0% interest credit card is still often lower than other alternatives.
Balance Transfer Card
A balance transfer card helps with moving your debt into one place, with a preferable APR on the transferred amount, when compared to the origin of the debt. Such a card requires a good credit score.
Credit Cards for Bad Credit Scores
To build your credit score, you need a credit card, but to own a credit card, you need a good credit score. The exception to the rule comes in the form of a secured credit card, meaning those with a poor credit history can start to set things right. A secured credit card will require an upfront security deposit, which you get back once you switch over to the standard unsecured credit card. To avoid paying a security deposit, you can opt to co-sign on a credit card, though that puts the other owner’s credit score at risk.
Student Credit Card
As the name implies, a student credit card is for students looking to build up their credit score and set a foundation for their credit history. There are cards from other categories, such as rewards cards, that also fit into the student credit cards category.
How Was This List Compiled?
There is no best credit card company, though there are ones that are better than others. The credit card issuers on this list do stand out among their competitors, making them all great options to consider. Some factors considered when putting this list of credit card providers together include:
- Customer Service – A credit card is a financial tool that you will use almost daily. It allows you to have less reliance on cash, so any problems should get resolved quickly.
- Credit Card Fees – Credit cards come with a variety of fees, and though your credit score dictates what you will have payback, these listed credit card companies offer some of the best APR, and a more affordable annual fee, if any.
- Credit Limit – The credit limit decides how much you can borrow with your credit card. As detailed above, you should aim to be using 30% or less of the credit card limit at a time.
- Rewards – For reward cards, not all credit cards are equal. The rate that bonuses get awarded can differ from provider to provider, as does the quality. The chance to earn unlimited cash back rewards will always be better than cash back rewards with a limit or cash back that is restricted to statement credit. Also, some providers have a dedicated rewards program, such as the Chase Ultimate Rewards program, which offers you the chance to choose the rewards best for you.
The Best Credit Cards of 2020 – The Round-Up
The credit card providers above are sure to have a credit card for you, whether you are looking for a rewards card, a 0% interest credit card, or just a general card to use throughout the day. However, before you can get picky with your credit card, you need to get your credit score up, as that is the only way to get your hands on the best offers with bonus features to benefit your spending habits.