This story is part of, CNET's coverage of smart money decisions for today's changing world.
and have made for a financially precarious 2022. When used responsibly, the right credit card can help assuage the impact of these headwinds. Credit cards offer a host of perks -- rewards, promotional financing, the security of virtual credit cards, to name a few -- counterbalanced by potential costs like annual fees and annual percentage rates, or APRs.
With so many credit card offers on the market, it can be difficult to discern quality features and pick the credit card that best matches your personal financial needs. Below we review the most important things to consider so you can cut down on the noise and focus on what matters.
Define your financial goals first
"What is the best credit card?" is a one question you'd probably be asking yourself if you're just getting started with credit cards. The answer? It depends. There's no one-size-fits-all credit card out there that may suit the needs of everyone. It will all depend on your financial priorities.
Here are some of the common financial goals people put their credit cards to work on.
Save money on everyday purchases
If your goal is to pay a bit less on everyday expenses, a rewards credit card – which can earn you cash back, points or miles – is the way to go. These cards give you a small percentage back on every purchase you make.
Some cards offer multiple categories for earning elevated rewards rates, some offer a flat rate on all purchases and some offer flexible rotating categories. Rewards categories may home in on different parts of the average budget, such as groceries, gas, restaurant dining and more. Some people even mix and match among several cards throughout their week to get the highest rewards rates on each transaction.
Fund your next trip
With the price of flights and hotel stays rising due to inflation, a travel rewards credit card can help you save on your next trip. These cards allow you to earn points or miles on every purchase you make, often with elevated rewards on travel purchases. Some of the best also offer benefits that will enhance your travel experience, like access to airport lounges, priority boarding or late checkout. If you're a brand loyalist, you can get even more specific – and often higher value – rewards with a hotel credit card or airline credit card. These can net you free night stays at the hotel chain and discounts on in-flight purchases, respectively, as well as other perks.
Improve or build your credit
One of the basic rules of the American financial system is that great credit can help you open many doors – and bad credit can keep them, unfairly at times, shut. If you're considering buying a house or a car, having good credit will help you get the best loan terms. If you're planning to rent an apartment, apply for a new job or get a cellphone contract, having good credit can make the difference between getting your application approved or denied.
Having an open credit card account on your credit report and using it frequently in a responsible way – paying your bill on time every month and using less than one third of your available credit – is a surefire way to build and maintain strong credit.
There are cards designed specifically for those with bad credit or fair credit. These cards may have less frills than rewards credit cards, but they can help you build your credit so that you can qualify for better features in the future.
Alternatively, secured credit cards are available for those with credit problems. You submit a security deposit as collateral, which will amount to your available credit. After a few months of responsible use, some secured cards allow you to "graduate" to a traditional credit card and get your deposit back.
Finance a large purchase or consolidate debt
Some credit cards offer zero interest introductory promotions for a period of time, usually between 12 and 18 months, giving cardholders the flexibility to pay for purchases over the duration of the promotional period without incurring interest -- as long as you pay the minimum payment on time each month. From a new computer to a minor remodeling project, an intro APR credit card can help you finance a large or unexpected expense.
The key is to budget your purchase, making sure you make at least minimum payments on the card every month -- otherwise, the introductory zero-interest promotion will lapse – and that you pay off the whole amount in full before the promotion ends. If you don't, you will have to pay interest on any remaining balance on the card.
If you're looking to consolidate debt on high-interest credit cards with a similar 0% introductory APR, you can move your balances onto a balance transfer credit card. This will allow you some interest-free breathing room during a promotional period so you can more easily pay off existing debt.
Capitalize on welcome bonuses
One of the best ways to rack up points or cash back quickly is to apply for a new credit card with a generous welcome bonus. In order to earn the bonus, you typically have to spend a certain amount of money on the card within the first months after you get approved for the card, usually between three and six months.
Before jumping on the juiciest sign-up bonus you can find, check your monthly spending and make sure that you'll be able to meet the threshold without overspending. You don't want to go into debt to earn a welcome bonus.
Consider annual fees
As you look for credit card options, one important aspect you should consider carefully is the annual fee. Many great credit cards charge no annual fee. Other cards, however, do charge annual fees – some can be hundreds of dollars. You'll want to make sure you can afford the annual fee and that the card will offer you enough value over the course of the year to offset it.
Look for value beyond rewards
Search beyond the cash back or points a credit card offers and spend some time learning about its benefits. Some of these extra perks alone might make a particular card compelling. You'll have to check the fine print to know exactly what your credit card offers. Some of the most valuable benefits may include:
Rental car insurance. Some cards offer primary rental car insurance, which means the card company will cover you in the event the rental is damaged or stolen. For most cards that offer this, however, it is only secondary rental car insurance. This means their insurance will cover anything not covered by your own car insurance, but you'll have to use your car insurance to the full extent first. But you can still skip the car rental insurance the agency offers your for an additional charge at the counter.
Trip cancellation or interruption insurance. If your trip gets canceled or you have to interrupt your trip for an eligible reason, your credit card may reimburse you for non-refundable expenses purchased with the same card up to a specific amount, like your flight or hotel accommodations.
Purchase protection. Some credit cards will cover any purchases made with the card that get accidentally damaged, stolen or lost. Purchase protection reimbursement amounts vary from card to card, and they usually come with a fair amount of restrictions and exclusions.
Extended warranty. Cards that offer this benefit usually extend the life of the warranty of purchases made with the card. Similar to purchase protection, this benefit usually comes with multiple exclusions and restrictions, so make sure to read the fine print when shopping for options.
Cellphone insurance. If your phone dies, breaks or gets stolen, your credit card might cover its repair or replacement as long as you pay your cellphone bill with the card. Cellphone insurance usually is based on a certain coverage amount per claim or a maximum per year, with a cap on the number of claims you can file per year. However, this benefit might help you save money by not having to pay for cellphone insurance through your mobile carrier.
Secure shopping. With identity theft and data breaches on the rise, credit cards offer several ways to protect your data when you shop, either in-store or online. The easiest way to shop more securely with your credit card at brick-and-mortar stores is by using the contactless option, which is now widely available in the US. When you "tap" to pay, your credit card creates a one-time code that transmits your card number to the payment terminal, making it very difficult for the personal information on your card to be stolen.
Virtual card numbers. As physical credit cards have become more secure, online credit card fraud has risen. Entering your credit card information online, especially on websites you're not familiar with, can be risky.
To mitigate risk, you can use a virtual credit card number. Some credit card issuers give you the option to create virtual numbers for your physical credit cards, which can be used online. Virtual credit cards create a placeholder number in lieu of your card's actual number that can typically be used just once and then expire.
Stay safe when using a credit card
Talking about ways to prevent identity theft, if you haven't yet, you may want to consider freezing your credit reports. All three major credit bureaus, Equifax, Experian and TransUnion, offer the ability to freeze your credit for free.
Freezing your credit report will prevent anyone from opening a new credit account in your name or accessing your credit report. It's a great way to ensure no one can open a credit card or other account in your name and try to stick you with the bill. There's a tradeoff though. Every time you apply for a new credit account – from a credit card to a mortgage or a personal loan – you can temporarily unfreeze your credit until your application has been processed. You'll have to do this for each credit bureau, but the process is surprisingly quick and can be done online.
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