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What is the Best Credit Card?

Choosing the “best” credit card is like asking what is the best city to live in or the best kind of ice cream. It is not a one size fits all proposition. There are a lot of different factors to consider and what is “best” for me may not be “best” for you. In some ways, the “best” card available is the Visa Black Credit Card it is the ultimate in Luxury.

The $450 annual fee includes perks like concierge service, free luxury gifts, free travel lounge access, etc. but if you have a poor credit rating or are on a limited budget, there is no way you are going to qualify for that card since it is reserved for the top 1% of all credit ratings.

Best Credit CardsSo is the Visa Black Credit Card the best card for you? Probably not, unless you happen to be in that 1%. So in addition to card features you need to compare eligibility. Are you actually eligible for this type of card?

Credit Cards for those with Excellent Credit

The next most luxurious cards are the cards for people with “excellent credit“. These cards often provide the lowest interest rates,  some type of rewards and/or  No Annual Fee.

No Annual Fee Credit Cards

If you are trying to cut expenses and have a good to excellent credit you might consider the top priority to be a No Annual Fee Credit Card  these may or may not have rewards programs associated and the interest rates will vary but you will not have to pay for the privilege of having a credit card. If you carry several credit cards then the annual fees can really add up. For instance if you had 10 cards with an annual fee of $45 each you might as well get a Black Card since you will be spending the same amount! That might be a bit of an extreme example but the principle is the same, you may have fewer cards but they may have higher annual fees.

Travel Rewards Credit Cards

If you travel a lot for work, you might find that the travel rewards cards are best for you.  If your company reimburses expenses that you make on your own credit card, you can funnel some of the benefits to your own travel rewards and maybe take the family on a nice Hawaiian Vacation using your travel rewards. After all, you are using your credit for the advantage of the company, you ought to get some benefit back.

Even if you just charge all your personal bills on a travel rewards card you can rack up significant miles and maybe earn enough for that dream family vacation. If you have your own business you might find that you can charge business expenses or inventory on a Business Rewards Credit Card and rack up miles that way. Of course you want to be sure to pay off the balance every month so that you don’t accrue interest charges but by constantly turning over the balance you can accrue even more miles. Generally, $10,000 in purchases will give you about $100 in ticket credits but this varies from card to card. But if you charge $10,000 a month in business expenses and pay them off every month you will have enough to buy $1,200 in plane tickets and/or hotel bills at the end of the year.

Low Interest Rate Credit Cards

On the other hand, if you need to carry a balance because of unexpected bills you should opt for a low interest credit card. Generally, the rewards cards carry a higher interest rate (after all they have to pay for those rewards somehow), if you pay the balance off every month and turn over higher volume that won’t affect you.

But if you are carrying a balance, the best credit card for you is one with a low interest rate. A few percentage points can make a big difference if you carry a balance for any length of time. As of this writing low interest rate cards may have a rate of 7.25% but a travel rewards card might have a rate 10% higher  (15%-20%  isn’t uncommon)  If you carry an average balance of $10,000, a 10% difference means that you pay $1000 extra in interest over a single year. Plus if you aren’t turning over the balance every month you will only get 10,000 miles. So it is hardly worth getting a $100 plane ticket if it costs you $1000 in interest.

 Bad Credit and Instant Approval Credit Cards

If you have bad credit or want Instant Approval you will be paying much higher rates for the privilege of having a card and you might be best off not getting a card at all but working on improving your credit rating. But if you need a card for emergencies you might want one of these type of cards. But just remember those shoes that just went on sale or that new bass boat are not “emergencies” and you should never use high interest credit cards to make these type of purchases. Even things like new tires are rarely an emergency (you know that tire wear out don’t you?) so they should be a planned expense. Of course running over a piece of metal that shreds your tire beyond repair is a totally different story. And using a high interest card is better than an even higher interest payday loan. So sometimes you have to choose between bad and worse. This is why  you should have an emergency fund. Because when you have the funds set aside, that slashed tire is no longer an emergency, it is now just an inconvenience.

Choosing the Best Credit Card for YOU

So choosing the best credit card for you is all about your personal circumstances. What are you going to use the card for? Which card benefits are you eligible for?  What card benefits are most important to you?  Once you answer those three questions you will be in a much better position to  decide the question… What is the best credit card for you?

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Image courtesy of Sura Nualpradid / FreeDigitalPhotos.net

About Tim McMahon

Work by editor and author, Tim McMahon, has been featured in Bloomberg, CBS News, Wall Street Journal, Christian Science Monitor, Forbes, Washington Post, Drudge Report, The Atlantic, Business Insider, American Thinker, Lew Rockwell, Huffington Post, Rolling Stone, Oakland Press, Free Republic, Education World, Realty Trac, Reason, Coin News, and Council for Economic Education. Connect with Tim on Google+