Most American households use the popular purchasing tool known as credit cards. Hundreds of millions of credit cards are in circulation in the United States. Americans use their credit cards for more than one trillion dollars of transactions annually. Due to such popularity, credit card availability is abundant, and the industry is competitive. However, selecting the perfect credit card can be a daunting task. Credit cards have several different features to evaluate. Credit cards usually focus on making at least one feature really good so they can attract consumers who value that feature most. For example, one card may offer a low interest rate, whereas another card may offer travel rewards. The different types of benefits target different types of consumers. As a result, no one credit card is the best for everyone. In this article, I will review some relevant facts about the credit card industry and outline my recommended process for choosing a credit card.
There are four major credit card brands in the United States. In order of popularity, they are Visa, MasterCard, American Express, and Discover. Visa and MasterCard are used for about 80% of credit card transactions in the United States and are the most widely accepted cards around the world. Discover cards are rarely accepted outside the United States. If you are only going to have one credit card, I would suggest the Visa card since it is the most popular. For your second credit card, I would suggest getting a MasterCard so you have some variety. Once you have a Visa and a MasterCard, take your pick among the four brands for your third credit card. I do not see the need in having more than three or four credit cards, so do not overload just for variety's sake. You can probably work fine with just one credit card, but if you are also looking to maximize your credit score, two to four cards is the best mix.
After deciding on a credit card brand, you need to find a credit card issuer. Visa and MasterCard branded cards are issued by banking institutions. A few of the largest credit card issuers are Citibank, Chase Bank, and Bank of America. The design of the credit card will display the issuer's name in most cases. For the issuer, I suggest choosing a large bank with expansive geographic coverage, giving preference to banks where you already do business. Managing your credit card may be somewhat easier at a bank where you are already a customer. Also, a large bank may provide better account access, features, and security. In Texas, the largest national banks are Bank of America, Wells Fargo, and Chase, and they all offer credit cards. Some other issuer choices in the United States are Citi, Capitol One, HSBC, and U.S. Bank. American Express and Discover cards are usually self-issued by their respective brands, but I have seen some American Express cards offered through banking institutions.
To help narrow down which credit card issuer to select, you may want to compare the features of each credit card. There are low interest cards, balance transfer cards, poor credit history cards, travel rewards cards, cash back cards, and possibly other credit card features that target specific consumer groups. For example, I pay my credit card balance in full each month, so I do not care about a low interest rate. I value more the rewards options. Some credit cards will charge fees for certain features or benefits. I suggest avoiding credit cards that charge annual fees unless you actually do the math and know the feature is worth the fee. The credit card industry is competitive enough that you should not have to pay for features. The cash back feature is my favorite. The typical rate is 1% cash back, meaning I can receive $25 cash for every $2,500 I spend using my credit card. Most major credit card issuers offer a cash back option.
Based on my credit card selection process, I have found a few credit cards I favor: Chase Freedom Cash Back Visa, Bank of America Cash Rewards Platinum Plus MasterCard, Wells Fargo Cash Back Platinum Card Visa. I am not suggesting these credit cards are the best. The appropriateness of a credit card can vary depending on the needs of the individual. When using credit cards, remember that credit card purchases are short term loans that have to be repaid in full, possibly with interest. Accumulating credit card debt at an interest rate of 20% or 30% can cause a challenging financial burden. Failure to pay your credit card balances in agreement with the credit card company terms will damage your credit history. All of that said, credit cards can be financially helpful when used wisely. Credit cards provide a convenient way to make purchases, track expenses, and build credit history. Invest some time to evaluate and select the credit cards that best serve you and use those credit cards wisely to your advantage.
Sources: CreditCards.com, Wikipedia.org
